SUMMARY of the Article “Climate debt trap,” by Jamil Ahmad, Dawn, June 15th, 2024
The article explores the severe challenge of heavy and rising debt faced by developing nations, which significantly hampers their efforts to tackle climate change, reduce poverty, and pursue economic development. Between 2010 and 2022, the external debt of 118 low- and middle-income countries doubled to $3.1 trillion, constituting about 15% of their GDP. In 2022 alone, these countries spent $443 billion servicing public debts, with this figure expected to rise in the coming years. Factors such as inflation, high interest rates, the energy crisis, and economic uncertainty post-COVID-19 have exacerbated this situation. The high debt service payments limit the fiscal space necessary for investments in climate action and sustainable development, pushing many developing nations toward default. This liquidity crisis sidelines climate and environmental priorities, posing global risks including exacerbated poverty, food insecurity, water scarcity, and health issues. To address this, immediate debt relief is suggested, freeing up fiscal space for climate and development investments. Options include lowering borrowing costs, extending long-term loans, and debt swaps for climate actions. The V20 group of climate- » Read More…