In April, the IMF approved a $118 million loan to Mozambique in the wake of Cyclone Idai. The rapid loan was designed to address Mozambique’s “financing gaps arising from reconstruction needs”. At the time, Mozambique, the world’s sixth poorest country, was already experiencing an “illegitimate” debt crisis (see Observer Summer 2018), which has led to public spending per person falling by 30 per cent, according to UK-based civil society organisation (CSO) Jubilee Debt Campaign (JDC).
The IMF specified that, “reconstruction needs will have to be covered by the international community mostly in the form of grants”. Under the Paris Climate Agreement, governments have recognised this climate change-related financing need as ‘loss and damage’, as separate from finance for adaptation and mitigation. Yet, so far, the international community has failed to provide adequate finance for ‘loss and damage’, even as major natural disasters aggravated by climate change have materialised. This was evident with Dominica’s 2017 Hurricane Maria and Fiji’s 2016 Cyclone Winston, which left 77 and 87 per cent of their loss and damage unfunded respectively.
Instead, the IMF and World Bank are trying to plug this gap through loans, as was suggested in a June IMF discussion paper on resilience. The rising trend of financing climate change-related loss and damage through further indebting countries that have contributed least to climate change, is “a shocking indictment of the international community” according to Sarah-Jayne Clifton, of JDC , which is urging the IMF to write off debt to countries hit by Cyclone Idai.
To finance the estimated $300 billion per year that climate-related ‘loss and damage’ will cost developing countries within the next decade, UK-based CSO Stamp out Poverty and partners have proposed a “climate damages tax”, designed to make those most responsible pay, in order to provide new and additional finance for loss and damage.
(Bretton Woods)
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