Economics

In the News

COP26 - Poorer countries spend five times more on debt than climate crisis

Graham Watson

27th October 2021

The extent to which the developing world is able to spend money on coping with climate change is laid bare in this article.

The striking headline notes that poorer countries spend five times more servicing their debts than coping with the effects of climate change.

"Lower income countries are handing over billions of dollars in debt repayments to rich countries, banks and international financial institutions at a time when resources are desperately needed to fight the climate crisis,”

However, you could also argue that many of them spend more on servicing their debts than spending on education and healthcare too.

To what extent should debt relief be a key part of the climate change negotiations? Much of the climate finance allocated to low income countries comes in the form of loans (i.e. extra debt) rather than grants. And the interest paid on these loans far outstrips the interest rate paid by advanced countries on their bond issues. Low income countries regularly pay more than 10% interest on loans compared to an average 1.5 to 2.5% paid by rich countries.

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