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The world’s poorest countries are reeling from debt made worse by exchange rate fluctuations and worsening climate shocks, a new study has found, as officials considered ways to ease the burden at the Spring Meetings of the International Monetary Fund (IMF) and the World Bank this week.
On Friday, the International Institute for Environment and Development (IIED) issued new research showing that Least Developed Countries (LDCs) and Small Island Developing States (SIDS) have been required to take out loans for their growth and development in foreign currencies – usually US dollars – forcing them to spend billions of dollars every year repaying sovereign debt.
These poorer countries become vulnerable to currency volatility – and when extreme weather like powerful storms batters their fragile economies, their debt burden grows even bigger.
“With every climate-driven disaster, their requirement to borrow more money increases while their currency simultaneously devalues,” said Ritu Bharadwaj, IIED principal researcher and the paper’s lead author. Moreover, because the global economy is largely structured around the US dollar, “these countries are taking on all the risk associated with currency fluctuations,” she added.
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IIED researchers examined how debt repayments and currency volatility affected 13 representative countries, and cross-referenced that data with climate modelling, showing a clear link between climate disasters and currency depreciation – which in turn leads to spiralling debt.
To solve the problem, they proposed that international financial institutions offer new loans in local currencies, while debtor nations should be allowed to swap existing debt for investments in climate, nature or social protection.
“What we’re suggesting is that creditors should take on some of that risk as part of reforms to make the global financial system fairer,” said IIED’s Bharadwaj.
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The research – which focused on 13 countries across Africa, Asia and the Americas, using data from 1991 to 2022 – showed that over that 31-year period, the average value of SIDS currencies fell against the US dollar by around 265% and that of LDCs by 366%. As a result, the local currency cost of repaying their debt jumped.
Using the 2022 value of the US dollar as a baseline, the cumulative extra cost for SIDS over those three decades was $10.25 billion, the equivalent of 3% of their GDP per year. For LDCs, the cumulative value of extra repayments was $9.98 billion, equal to 6.6% of GDP.
These huge sums vastly outweigh the amounts SIDS and LDCs can spend on curbing their planet-heating emissions and adapting to climate change, and paying back debt diverts scarce resources from other day-to-day spending on healthcare and education, the study found.
Gaston Browne, prime minister of Antigua and Barbuda, said the analysis provides an “urgent and credible foundation for action”, adding that “the paper makes clear that the hidden cost of repaying debt in foreign currencies, especially during times of crisis, is a silent drain on our economies”.
“For every dollar lost to currency depreciation, there is a clinic not built, a road not repaired, a social protection programme left underfunded,” he said.
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Ghana’s fossil fuel trap
Separately, another report from the Centre for Research on Multinational Corporations (SOMO) and ActionAid Ghana argued that fossil fuel companies have profited from World Bank support for multi-billion-dollar oil and gas projects in Ghana, while its people continue to suffer from power outages, unaffordable electricity and rising public debt.
In the report published on Thursday, the researchers said $2 billion in World Bank funding for oil and gas projects had led to surplus supplies and mainly benefited the private companies running the projects.
Oil and gas projects backed by big multinationals – including the Sankofa gas deal, Jubilee oil and gas project and the West African Gas Pipeline – have over-promised but under-performed, the report said. As a result, they have failed to solve Ghana’s energy and power crisis, causing the country to spend more on fuel imports or buying up costly unused gas.
Joseph Wilde-Ramsing, acting executive director of SOMO, said: “Ghanaians are paying high prices for electricity they can’t afford, while foreign oil and gas companies reap guaranteed profits.” He described the situation as one of “utter negligence, exploitation and a climate disaster rolled into one”.
“Ghana has been compelled to enter into energy agreements that are unaffordable and unsustainable,” said John Nkaw, country director of ActionAid Ghana. “These contracts seem to guarantee profits for oil giants while our government struggles to pay off debts.”
According to the World Bank, which provides guarantees for such projects in the host country to leverage capital investment, the Sankofa Gas Project – approved by the bank in 2015 – had the objective of increasing the availability of natural gas for “clean power generation”.
Multinational energy firms Eni and Vitol served as private sponsors alongside the Ghana National Petroleum Corporation, while the World Bank provided $700 million in guarantees to reduce financial and political risks.
Makhtar Diop, then World Bank Vice President for Africa, said at the time that the guarantee was the largest provided by the bank, and would allow the country to leverage up to $8 billion in foreign direct investment, thereby transforming electricity, enabling lower-carbon power generation, increasing electricity access and reducing oil imports.
The World Bank also provided guarantees to cover any risk eventualities for the West African Gas Pipeline, including $50 million from its International Development Association, $75 million from its Multilateral Investment Guarantee Agency, and $125 million from the Steadfast Insurance Company. Those political risk guarantees helped the project get to financial closure, with the bank saying the project would not have gone forward without them.
The World Bank was contacted for comment but had not responded by the time of publication.
Global finance system reform
Speaking to journalists this week at the IMF/World Bank Spring Meetings in Washington DC, Ceyla Pazarbasioglu, the IMF’s strategy chief, agreed there is an urgent need to address the high debt service burden facing many countries, adding that the situation is becoming more acute in the current global economic environment, Reuters reported.
Noting the growing challenges facing vulnerable low- and middle-income countries, Kristalina Georgieva, the IMF’s managing director, said the global lender must be more active in debt restructuring processes.
Commenting on the IIED’s research, Prime Minister Browne of Antigua and Barbuda said that, as SIDS face worsening climate shocks, deepening debt burdens, and volatile currency markets, the findings provide evidence to advance reforms that are “fair, feasible, and necessary”.
Browne called for change to the current global financial architecture, which he said places an unfair burden on the most vulnerable and creates structural barriers to investment in climate resilience, adaptation and long-term development. “As Co-Chair of the Debt Sustainability Support Service (DSSS), I am committed to taking this issue to the highest levels of international decision-making,” he added.
Under Ghana’s ongoing debt restructuring, SOMO and ActionAid are advocating for an independent process that assesses the historical and current levels of fossil fuel-related debt affecting Ghana’s finances, followed by the cancellation of that debt.
They called for greater transparency and fairness in global energy investments, adding that all energy contracts that shift financial risk onto countries should be reassessed.
“As the US calls for the World Bank to continue investing in fossil fuels, our latest report is a stark warning on what the World Bank’s fossil fuel investment can do to a country’s economy and energy sector,” SOMO’s Wilde-Ramsing said.
The post Climate shocks and volatile currencies hike debt burden for poor countries appeared first on Climate Home News.
Climate shocks and volatile currencies hike debt burden for poor countries
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Prepared by a coalition of nine Western Australian union, industry, conservation, and community organisations—including UnionsWA, the Conservation Council WA, and the Smart Energy Council—the WA Clean Energy, Jobs & Industry Plan provides a practical roadmap to transform Western Australia into a clean energy powerhouse while creating thousands of secure local jobs.
Western Australia stands at a pivotal crossroads: lead the global clean energy economy or watch investment, future industries, and secure jobs go elsewhere. The WA Clean Energy, Jobs & Industry Plan outlines a transformative blueprint to harness the state’s world-class solar and wind resources. Discover how legislated renewable targets, green iron manufacturing, and a dedicated regional training strategy can generate tens of thousands of local jobs, lower household bills, and build a resilient, net-zero future for all Western Australians.
WA needs a clear and forward-thinking plan if it is going to become a competitive renewable energy powerhouse and maintain its economic strength through the energy transition.
“Western Australians know a faster renewable energy transition will lower their household expenses and prevent harmful climate pollution. But the community also needs clear direction to ensure this transition will create jobs, lower costs and not cause undue environmental harm.
“Here, sectors representing a broad range of interests have laid the groundwork for those outcomes, clearly outlining what is needed to create a future for WA that is good for the environment, for the climate, for workers and for the economy.
Summary
The WA Clean Energy, Jobs & Industry Plan sets out a strategic roadmap to position Western Australia as a global clean energy superpower while creating thousands of secure local jobs.
The report establishes three overarching goals:
- Creating local employment.
- Maintaining industrial competitiveness.
- Lowering household energy costs
To realize this vision, the framework details actionable measures to follow on from the recent WA Government announcement of a 75% Renewable Energy Target by 2031 for the South West Interconnected System. This includes developing a statewide Renewable Energy Target, coordinating statewide workforce and training pipelines, strategically planning regional infrastructure to safeguard high-value biodiversity and cultural heritage, and ensuring equitable benefit-sharing through household electrification incentives and First Nations equity partnerships. Ultimately, the plan highlights that establishing clear policy and regulatory certainty will unlock lower energy bills, boost power reliability, and secure the state’s global competitiveness in emerging green commodity export markets.
Key Findings
- Statewide Renewable Energy Target and Emissions Reduction Targets: The report calls for a statewide RET and 1.5°C aligned emission reduction targets to remove policy risk, lower capital costs, and attract clean energy investment.
- Transformative Job Creation: Accelerating the transition offers massive employment prospects, including up to 8,800 solar and battery jobs by 2050, as well as 24,000 ongoing and 11,000 construction jobs in a commercial green iron industry.
- Industrial Electrification & Competitiveness: Requiring large gas users to adopt binding electrification timetables and providing concessional financing will protect existing energy-intensive manufacturers from rising energy costs and impending domestic gas shortfalls.
- Green Commodity Export Leadership: Western Australia can build new export markets in green iron, green ammonia, and offshore oil/gas decommissioning by constructing shared common-user infrastructure and setting dedicated Green Commodity Export Targets.
- Coordinated Workforce & Training Pipeline: To address critical skill shortages the plan recommends establishing a WA Clean Energy Jobs Plan 2050, three regional training hubs, and dedicated pathways for female and under-represented apprentices.
- Environmental Safeguards & Community Benefits: Fast-tracked development must be paired with State Planning Policies that avoid high-biodiversity and cultural heritage lands, mandate new data centres to run on additional renewable power, and deliver household electrification rebates and First Nations equity partnerships.
What you can do
WA has an opportunity to lead on sustainable, clean energy and associated industries. You can help by:
- Sending an email to Environment Minister Murray Watt and Prime Minister Anthony Albanese, calling on them to reject Browse.
- Sharing this story to help more Australians understand what’s at stake.
- Encouraging your friends and family to take action.
Countries have completed the first “global review” of their progress towards reversing nature loss by 2030 at the COP17 biodiversity talks in Yerevan, Armenia.
The review “notes with deep concern” that, unless action is “rapidly accelerated”, the goal to reverse nature loss and meet a set of 23 targets by 2030 “will not be achieved”.
It “urges” countries to accelerate action, including by “increased ambition in addressing the gaps”.
Much of the discussions in Yerevan focused on how to raise the necessary funds to help developing countries protect nature.
Some major economies pushed to expand the range of nations that are expected to provide finance, with countries agreeing at the end of the two weeks of talks that non-donors that want to contribute can “signal interest” before COP18.
This came after developed countries failed to meet a target to significantly ramp up nature finance over the last few years.
It also came as a landmark fund agreed at COP16 in Colombia to pay communities for the genetic resources derived from nature stands nearly empty two years on.
The Yerevan talks marked the halfway point of the “Kunming-Montreal Global Biodiversity Framework” (GBF), the “Paris Agreement for nature” first made in 2022 and due to be achieved by 2030.
During the nearly 12-hour-long final plenary, countries voted for Quito, Ecuador, to host the COP18 nature talks, which will be held in 2028.
Countries managed to sign off on all the major negotiation texts, marking a stark contrast to COP16, which ran so far over time that the Colombian presidency lost “quorum”, forcing talks to resume in Rome months later.
Below, Carbon Brief has detailed analysis of all of the key outcomes from COP17.
Formal negotiations
Finance
Finance, predictably, was at the heart of the discord and deadlock at the Yerevan talks.
At COP17, discussions on finance had to achieve several outcomes.
The first part – to take stock of biodiversity finance mobilised so far to meet the nature deal’s goals – fell under the global review.
As the global report noted, developed countries failed to meet their commitments to raise “at least $20bn a year by 2025” for nature. Delegates pointed to falling aid levels and a sharp 27% decline in environmental funding for the 2026-30 period.
The second part was to agree on how to mobilise resources for the next four years, to meet the GBF’s goals and targets.
Calls to “broaden the contributor base” of who pays to protect nature – and whether that should include emerging economies – became the most fraught element of the talks.
Eventually, countries agreed on what Switzerland described as a “super, mega-delicate” text. It hinged on major “political compromises”, with “no major winner or loser”, according to Kenya.
Per the decision, countries that want to be included on a list of developed country donors can “signal interest” through bilateral, confidential consultations before COP18 and every alternate COP after.
Finally, countries also agreed on criteria to shape and resource a new, permanent financial mechanism to protect nature after 2030.
However, this did not immediately take the form of a new fund under the COP that biodiverse countries have demanded since 2022, deferring the mechanism’s institutional structure to COP18.
Resource mobilisation discussions at the GBF’s halfway mark were supposed to agree on how to close the “biodiversity finance gap” and to “increase resources from all sources” to “at least” $200bn per year by 2030, as set out in target 19 of the GBF.
The talks were largely dom