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Kenya, Colombia, and France on Monday commissioned a global team of experts to examine the impact of developing countries’ ballooning debt levels on their ability to deal with the growing threat of climate change and to conserve nature.
The review team, launched on the sidelines of COP28 in Dubai, will recommend reforms to the global financial architecture, at national and international levels, to make developing countries more fiscally and environmentally sustainable amidst climate-change instigated crises.
“For developing countries, this is a critical situation because many of our economies are highly indebted especially after the Covid pandemic, and we require the fiscal space to be able to make the financial investments required,” said Colombia’s Minister of Environment Susana Muhamad during the launch of the review on Monday.
Read: Climate action for Africa in 2023
The three countries had proposed the establishment of the experts’ team during the summit for a new global financing pact held in Paris in June this year, and the inquiry set for launch at COP28.
According to the French Minister for Energy Transition Agnès Pannier-Runacher, the review is necessary because “we are at a critical moment where we need to work together on new instruments and mechanisms to find new financial resources to fight climate change while fostering development.”
“Unsustainable levels of sovereign debt and debt-service payments plague many emerging and developing countries, forcing them to slow down on caring for nature and climate and on developing their economies, people, and social services simply to avoid default,” said Ali Mohamed, Kenya’s special envoy for climate change.
Over the last 10 years, Africa’s debt has ballooned and has doubled from less than 30 percent of GDP on average in 2013 to 60 percent by end of 2022, and experts warn that the debt challenge is exacerbated by climate change.
Mr Mohamed said the team of experts will look into how the global financial system needs to change to enable developing countries, especially, better address the multiple crises they’re facing due to climate change and biodiversity loss.
“What we’ll have to achieve is a new method of looking at the financial flows of the world; some form of guidance on how finance should be arranged in a word that is continuously changing, facing different circumstances and crises,” Mr Mohammed said at the press conference.
The review will also look into the feasibility and effectiveness of debt-for-nature swaps as a means of tackling both the ballooning debt crisis in the developing world and the growing impacts of climate change and biodiversity loss.
Read: Could debt-for-nature swaps solve Africa’s twin problems?
“There are different analysis and cases that show that in some cases, debt-for-nature swaps have contributed to further indebtedness of some countries. What are the mechanisms of financing that do not end up with further debt?” Posed Ms Muhamad.
Debt-for-nature swaps are arrangements between a country and its bilateral or commercial lenders to write off part of its debts or waive interest and the amount saved is used for nature conservation and climate change mitigation programmes.
In Africa, the African Development Bank (AfDB) last year flouted the idea to countries on the continent, but so far only Gabon has successfully transacted one, raising questions on their feasibility on the continent. The commissioned team of experts is expected to provide answers to this as well.
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