50+ poor countries defaulting put climate action at risk: UN official

By Al Mayadeen English
Source: Agencies
11 Nov 2022 09:41

A catastrophic default by developing nations would impede climate action, as more than 50 poor countries are in danger of bankruptcy, the UN development chief warns.

View of a COP27 sign on the road leading to the conference area in Egypt's Red Sea resort town of Sharm El-Sheikh (Reuters)

The head of the UN Development Program has warned that unless the wealthy world provides immediate assistance, more than 50 of the poorest developing countries face the threat of defaulting on their debt and effectively going bankrupt.

A number of countries are in danger of defaults due to inflation, the energy crisis, and rising interest rates, which will have disastrous impacts on their people, according to Achim Steiner, the UN's global development chief.

“There are currently 54 countries on our list [of those likely to default] and if we have more shocks – interest rates go up further, borrowing becomes more expensive, energy prices, food prices – it becomes almost inevitable that we will see a number of these economies unable to pay,” he said.

“And that creates a catastrophic scenario – look at Sri Lanka [which has descended into civil strife] with all the social and economic and political implications this carries with it.”

Steiner said any such default would make it more difficult to address the climate crisis while speaking at the COP27 UN climate summit. “It certainly will not help [climate] action,” he said.

He warned that without the necessary measures to help with debt, poor countries could not get to grips with the climate crisis. “The issue of debt has now become such a big problem for so many developing economies that dealing with the debt crisis becomes a precondition for actually accelerating climate action,” he said.

Could developing countries abandon UN climate talks?

“We need to inject targeted liquidity into countries to be able to invest in energy transitions, and adaptation [to the impacts of extreme weather].”

He believes that the issue is negatively affected by the climate crisis as more nations experience the effects of extreme weather. While facing an increase in the threat of storms, floods, droughts, and heatwaves, poor countries are not receiving the financial assistance from the developed world that was promised.

Steiner warned that if developed country governments didn't follow through on a long-standing commitment to providing poor countries with $100 billion (£86 billion) annually in aid to help them reduce greenhouse gas emissions and prepare for the effects of extreme weather, some developing countries might abandon the UN climate talks.

“If Cop27 does not deliver a convergent path on the $100bn, I think many developing countries will leave Sharm el-Sheikh at least thinking about their commitments to the global climate process,” he said. “And I say that very deliberately because it doesn’t mean they will stop doing things at home, which they are already doing.”

Regarding developing countries, he believes that they were already taking their own actions to tackle the climate crisis, adding that “the developing world already invests multiples of the $100bn to help accelerate the energy transition. The way it looks to a taxpayer in London, or Berlin, or Paris, is why are we being asked to pay for everything that happens outside our country in the developing world?"

“And that’s simply not true. China, India, and countries such as Kenya, South Africa, Ghana, Morocco, and Egypt – they’re all investing their own resources in moving towards clean energy transitions. Never mind the extraordinary resources they have to mobilize when a climate-related extreme weather event hits.”

Loss and damage

Loss and damage, or the most devastating effects of extreme weather that nations cannot defend themselves against, is one of the most divisive topics at the Cop27 negotiations.

Steiner said the issue was often misunderstood. “It’s building on something that in many of our countries is an established practice. When extraordinary floods take place and the taxpayer essentially steps in, with the government paying house owners the damage that has not been recoverable from insurance companies,” he said.

“We have an established practice that the common purse steps in where a catastrophic event happens. But when a Caribbean island has a third of its GDP wiped out in 12 hours through a hurricane, there’s nobody to turn to.”

That was why a loss and damage fund was needed, he said. “That’s where the injustice of climate change becomes so egregious in the view of many developing countries. Not having been even remotely a principal causal factor [in the climate crisis], they are now paying an extraordinary price through the damage they suffer.”

Although he predicted that there wouldn't be a definitive agreement on the operation of a financial system for loss and damage at Cop27, he did assert that the countries convening in Egypt, where the negotiations are currently over halfway through, should be able to make significant progress.