The V20 Group of Finance Ministers from 58 climate-vulnerable economies – representing some 1.5 billion people including Bangladesh – Sunday demanded reforms in the global financing architecture as they face mounting economic threats from climate disasters and debt.
V20 countries have at least $435 billion of debt servicing payments due in four years at a time when new investment is severely needed, the Group said in its V20 Ministerial Dialogue IX Communique.
The combination of high debt servicing costs and climate change represents a systemic risk to climate-vulnerable economies that can trigger a vicious cycle that depresses revenues and exchange rates while increasing inflation and the cost of capital including for investments to respond to climate shocks themselves – all are factors that exacerbate climate vulnerabilities.
Climate change shocks and disasters have already eliminated $525 billion from V20 economies in the past 20 years, according to research commissioned by the Group.
“As economic managers, it has long been clear to us that climate change is not a distant challenge. It has set ablaze not only many of the world’s forests but also our fragile national budgets. Climate change is simply compounding existing and increasingly acute fiscal stress,” Ken Ofori-Atta, Ghana’s finance minister and current V20 chair, said.
“The international financial architecture must become fit for climate and our development ambitions and it must support and not detract from transformational changes needed in the real economy towards our common prosperity.”
“Climate change has already eliminated one-fifth of our wealth – in other words, V20 economies would be 20 percent wealthier today had we not been suffering the daily toll of climate loss and damage. In aggregate dollar terms, this is half a trillion in losses. And for the most at-risk countries, economic losses exceed half of all growth since 2000,” President of the Maldives Mohamed Nasheed said.
“For the most at-risk V20 economies, the loss exceeds total growth. We are experiencing losses and damages from the climate emergency every day, and yet we have contributed the least to emissions.”
Other calls from the V20 Ministerial Dialogue IX Communique include immediate reform of the sovereign debt restructuring architecture.
Then, through guarantee facilities and regulatory action, all creditor classes will be compelled to reduce the level of debt in V20 countries for them to mobilise financing for their climate and development goals, according to the statement UNB received from Washington.
The Group called on all international financial institutions and their major donors to consider debt flexibility to free up capital for investment in growth-spurring climate action. It urged multilateral financing institutions to specify their commitment to climate investment and to deliver at least a doubling in international finance for adaptation within the next 30 months, with all multilateral development banks (MDBs) ensuring their climate portfolios are at least 50 percent focused on climate adaptation.
Also, it said the delivery of the minimum $100 billion a year goal is commensurate with the emergency nature of the fallout of the global climate breakdown as it harms V20 economies and developing nations most and called for clear evidence of results through an update to the $100 billion Delivery Plan by COP27.
The Group also urged the World Bank and IMF to officially recognise V20 as an official constituency of the IMF/World Bank Group as it represents the common priorities and interests of 58 of the world’s most climate-vulnerable developing economies.