But instead of receiving funds to address the climate crisis, Africa is borrowing at a cost up to eight times higher than the rich world to rebuild after climate catastrophes. This is why Africa urgently needs a pause in debt repayments so that it can prepare for a world of ever greater climate extremes. The Annual Meetings of the International Monetary Fund and the World Bank in Marrakesh, Morocco, that begin Monday are a good place to start.
The global financial system was built to be a safety net for the world’s poorest countries, a fail-safe to prevent financial instability. But the world looks very different than it did nearly 80 years ago, when the architects of the system gathered at Bretton Woods to craft a new world order. The framework they installed is now outdated, dysfunctional and unjust. Outdated because the international financial institutions they created are too small and limited to fulfill their mandate. Dysfunctional because the system as a whole is too slow to respond to new challenges, such as climate change. And unjust because it discriminates against poor countries. In fairness, the World Bank and the I.M.F. now recognize that climate change is a threat to economic and financial stability, and they are changing their lending policies in response. But much more needs to be done — and we are running out of time to do so.
We are not the only ones who think the system needs fixing. António Guterres, the U.N. secretary-general, has called on the I.M.F. to rechannel $100 billion a year in special drawing rights, an international reserve asset, to pay for investments in sustainable development and climate action. The Bridgetown Initiative, co-started by Mia Mottley, the prime minister of Barbados, also puts forward measures to channel more credit and investment into climate resilience, and to lay down rules for providing debt relief for climate-vulnerable nations. This week’s meetings in Marrakesh are an opportunity to start transforming proposals into actions.
Africa called for a 10-year moratorium on interest payments on foreign debt to give the world’s most vulnerable countries the space to invest in climate resilience and other pressing needs, such as health and education. And we need a more imaginative use for debt relief — for example, debt-for-nature swaps — where a portion of a nation’s foreign debt is forgiven in exchange for local investments in environmental conservation measures. This is what has allowed the Seychelles to invest in marine conservation to protect its oceans and strengthen its defenses against rising sea levels. We also need more flexibility built into the system. Debt repayments, for example, should be suspended automatically when climate disasters strike.
It has taken Zambia three years to reach a restructuring agreement with creditors, just one example of how debt renegotiations get drawn out far too long. We need a speedier process that will quickly provide effective relief for the 52 countries that have defaulted or are at risk of it.