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The UK is offering debt deferrals for developing countries vulnerable to climate shocks

The UK is offering debt deferrals for developing countries vulnerable to climate shocks

(Alamy)

3 min read

From record breaking heat in India to flooding in Sudan, some of the world’s most vulnerable people are paying the punishing price for climate change.

In the wake of such disasters, the governments of developing countries face painful trade-offs between rebuilding their communities and making debt repayments.

If countries can’t service debt and respond to the crisis at the same time – then a climate disaster can quickly spiral into an unmanageable debt crisis. This in turn stunts economic growth and opportunities for wealth creation in areas that need them most.

Climate Resilient Debt Clauses will help break the vicious cycle of climate disasters and increased debt

That’s why in Egypt at COP27 this week we announced we are changing the rules so that countries most vulnerable to climate catastrophes can defer debt repayments, freeing up resources to fund disaster relief. A benefit to both the borrowing country and its lenders by helping avoid a more painful debt default.

The United Kingdom has led the way on this, establishing Climate Resilient Debt Clauses to help break the vicious cycle of climate disasters and increased debt. And I’m proud that UK Export Finance is the first export credit agency in the world to offer these clauses in its own direct lending to low-income countries and small island developing states.

This work is part of our wider commitment to help countries adapt to the impacts of climate change. Of course, this will require huge investment – this includes from the private sector, and we are committed to ensuring the UK remains the world’s leading green finance centre, with all the benefit that entails for jobs and growth back home.

But public resource is vital too and this week we confirmed that we will be spending £11.6bn on international climate finance. We are also tripling funding for climate adaptation from £500m in 2019 to £1.5bn in 2025. This investment underpins the innovative work the UK is leading on loan agreements that can support countries most exposed to climate change.

All this builds on the success of COP26 in Glasgow, which brought together nearly 200 countries and over 120 world leaders and saw nations adopt the Glasgow Climate Pact – the blueprint for accelerating climate action during this critical decade.

More than 90 per cent of the world’s economy is now committed to net zero – up from 30 per cent when the UK took on the presidency of COP.

While progress has been made, we are in no way complacent. Countries around the world are facing challenging questions about their energy supply – how to keep it affordable and secure for the future.

And this has only been exacerbated by Russia’s illegal invasion of Ukraine and subsequent skyrocketing energy prices, leaving governments around the world searching for solutions to protect their citizens. 

While there is urgency in that, we are here at COP27 in Egypt to make sure we don’t lose focus on our commitments that began at COP26 in Glasgow – protecting people and the planet from the extremes of climate change.

From the heatwaves to the floods we’ve seen this summer, it is now more important than ever to deliver on our pledges, ensuring countries remain committed to net zero, while protecting nature and transitioning to renewable energy.

The establishment of Climate Resilient Debt Clauses marks an important step towards managing the impact of climate change as we collectively take action to drive down emissions.

 

James Cartlidge, Conservative MP for South Suffolk and exchequer secretary to the Treasury.

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