This new briefing ‘Don’t owe, shouldn’t pay: The impact of climate change on debt in vulnerable countries‘ analyses the impact of climate change on debt in vulnerable countries, particularly small states. The briefing shows that for the most economically damaging disasters in the 21st Century, in over 80% of cases government debt was higher two years after the disaster.
Around 80% of the most damaging disasters since 2000 have been tropical storms, over 90% of them have been in Small Island Developing States, with over 60% being in the Caribbean. In contrast to suffering disproportionately from climate-related disasters, Small Island Developing States have made little contribution to climate change. 29 Small Island Developing States, with 0.7% of the global population are together responsible for just 0.2% of global carbon dioxide emissions.
Many small, impoverished states are already heavily indebted. The IMF conducts debt sustainability analyses for 21 impoverished Small Island Developing States. Of these, two are in default, 11 are at high risk of debt default, eight at medium risk and none are at low risk.
One solution being pushed by international organisations and the insurance industry is disaster insurance. However, the briefing shows how climate insurance scheme in the Caribbean has received $293 million in premium payments and grants from donors since it began in 2007 but has paid out just $131 million in claims. In contrast, $105 million from the scheme has gone to private insurance companies as profit.
Jubilee Debt Campaign are calling for a comprehensive debt relief scheme for small states to get debt down to a sustainable level to allow for better preparedness ahead of disasters hitting, as well as a permanent, effective, automatic debt relief process in response to disasters.
You can read the full briefing here.