Poor countries paying billions more to cover debts than they receive as aid to fight climate crisis
The world’s poorest and most climate-vulnerable countries are spending billions of pounds more to repay debts than they receive in funding to fight climate change, new research shows.
The analysis, from the International Institute for Environment and Development (IIED) think tank, finds that in 2023 – the most recent year for which data was available – the 59 countries that represent the world’s least developed countries and small island developing states paid US $37 billion (£28bn) to service their debts, but received only $32 billion (£24bn) in climate finance.
The findings reflect a “vicious cycle”, where countries are being forced to borrow more money to cover costs for a climate crisis they have barely contributed towards. This often comes at the cost of the healthcare or education budget, and leads to debts further piling up.
“It’s grimly ironic that the countries most vulnerable to the climate crisis have done the least to cause it,” said Sejal Patel, IIED senior researcher.
“Their crushing debt burdens make it very difficult to deal with increasingly damaging and unpredictable extremes of weather.”
Gideon Rabinowitz, director of policy and advocacy at Bond, a UK network for organisations working in international development. said: “The UK and other high-income countries must urgently act to break this devastating vicious circle, by reversing their cuts to international aid, meet their climate finance commitments and support an ambitious and comprehensive programme of debt restructuring and relief.”
Debt burdens in low-income countries have soared in recent years. Developing countries now spend an average of 15 per cent of government revenue servicing foreign debts each year, compared to just 6.6 per cent in 2010.
Forty per cent of the world’s population lives in countries that spend more on international debt than health or education, while more and more countries are falling into “debt distress”: A situation where countries cannot fulfill their external financial obligations, and debt restructuring is necessary.
Debt pressures are particularly felt in Africa, where 20 low-income countries are in, or at risk, of debt distress, according to the International Monetary Fund (IMF).
Not only are debt costs spiralling, but the flow of climate finance, aimed at helping developing countries adapt to climate change and cover climate losses and damage, remain hugely underfunded.
Climate-related disasters have increased by 83 per cent in two decades, according to the UN, displacing 22 million people annually since 2008. It is estimated that trillions of dollars of funding will be needed each year to cover climate loss and damages, climate adaptation and decarbonisation efforts in the Global South.
But at the COP29 Climate Conference last year, rich countries only promised that they would provide $300 billion annually in climate finance, thereby placing a huge financial burden on countries that have contributed least to the climate crisis, and likely forcing them to rely on private financiers that will further drive up national debt.
Climate finance flows to least developed countries actually fell in the most recent year for which we have full data. Down from $22.1bn (£16.6bn) in 2022 to $15.7bn (£11.8) in 2023.
Countries at the forefront of the climate-debt crisis include the southern African nation of Malawi, which in 2024 saw debt reach 86.4 per cent of GDP, while public debt interest stands at 8.4 percent of GDP and 49.2 percent of domestic revenues (which encompasses taxes and other levies).
