Climate Finance Crisis: Wealthy Nations Loan More, Cut Aid as Debt Surges
A new report reveals a concerning trend in climate finance. Wealthy nations, known as the Global North, provided 65 percent of climate finance to developing countries as loans in 2021 and 2022, with Yahoo Finance reporting a significant increase in the debt burden of low-income nations, now standing at $3.3 trillion. Meanwhile, Germany has cut development cooperation funds, and total climate finance is projected to drop in 2023. Oxfam and Care urge wealthy countries to increase support and shift towards grants.
In 2022, low-income countries received climate loans totaling $62 billion, with $88 billion owed in repayments, according to Yahoo Finance. This is part of the $3.3 trillion debt burden these countries now face. The report highlights that industrialized countries, which are the primary providers of climate finance, often lend at non-concessional rates, exacerbating the debt crisis.
Germany, one of the world's largest economies, has reduced its development cooperation funds by almost $1 billion in 2023, with further cuts planned. This comes at a time when total climate finance is expected to decrease from $95 billion in 2022 to less than $80 billion in 2023, as reported by Yahoo Finance. Oxfam and Care have called on wealthy nations to increase their support to $300 billion annually by 2035 and to focus on grants rather than loans. They propose taxing the super-rich and the fossil fuel industry as additional revenue sources.
The reliance on loans for climate finance is putting a significant strain on low-income countries. With total climate finance projected to decrease, there is an urgent need for wealthy nations to increase their support and shift towards grants. Oxfam and Care's proposals offer a pathway towards more sustainable and equitable climate finance.
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