The ongoing global climate crisis has deepened the inequalities between countries, moving the world farther away from achieving the Sustainable Development Goal (SDG) 10 of reduced inequality. The emission of greenhouse gases by high-income, Global North countries results in costly natural disasters around the world; this pushes lower-income, Global South countries into debt distress, with their scarce resources and debt repayments saddled with systemic inequalities that are created or heightened by the climate crisis. The G20 can facilitate collective action
The ongoing global climate crisis has deepened the inequalities between countries, moving the world farther away from achieving the Sustainable Development Goal (SDG) 10 of reduced inequality. The emission of greenhouse gases by high-income, Global North countries results in costly natural disasters around the world; this pushes lower-income, Global South countries into debt distress, with their scarce resources and debt repayments saddled with systemic inequalities that are created or heightened by the climate crisis. The G20 can facilitate collective action in the form of a systematic chain of coordination between multilateral groupings to enhance knowledge-sharing for a holistic understanding of the inequalities that lead to debt distress during times of crisis.
The year 2022 saw 10 of the most costly climate-related disasters in contemporary history, each of them resulting in more than $3 billion in economic losses. When a country is already in debt and is hit by a climate crisis, it puts even greater strain on their scarce resources. For example, the $5.6 billion that Pakistan lost due to the series of floods between June to October 2022, amounted to 2.2% of the country’s Gross Domestic Product that year. In addition to facing the financial fallout of the disasters, these countries have to worry about debt repayments as well. According to the International Monetary Fund (IMF), “As of February 28, 2023 and based on the most recently published data, nine countries are in debt distress, 27 countries are at high risk and 26 countries are at moderate risk.” All of them are in the Global South.
These countries are spending “5 times more on debt repayments than they are addressing the impact of the climate crisis.” World Bank research also shows that “payments on public debt made by 69 of the lower-income nations will total more than $62 billion this year (2022), a 35% increase over 2021” and “spending over a tenth of their export revenues to service their public external debt, a proportion not seen since 2000.” This can be attributed to creditors from high-income countries demanding debt repayment regardless of a crisis, whilst also providing climate finance in the form of loans instead of grants, which grows the country’s debt even further. The current lack of collective action towards solving such debt distress is moving the global community farther away from achieving SDG 10 of reduced inequality within and among countries.
The imperative is collaboration and engagement. While the world has grown more interconnected, entities continue to work in silos. Thus, a gap in policy coordination between multilateral groupings has created a knowledge vacuum, making high-income countries unaware of the extent of their role in leading lower-income countries to debt distress during crises—be it in the form of emitting excessive greenhouse gases which has caused the climate crisis, demanding debt repayment during crisis, or the negative impacts of systemic economic inequalities that are the legacy of colonialism and have only heightened during the climate crisis.
The debt distress facing Global South countries should be regarded as a global problem because of their domino effect. According to UN statistics, the massive economic fallout of debt distress has forced people to flee their countries, resulting in a record high of 24.5 million refugees in mid-2021.
The paper can be accessed by clicking here.
This article is authored by Tanya Keswani.
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