Pacific staring down ‘twin storms’ of debt and climate disaster

Pacific Island countries experiencing increasingly intense and frequent natural disasters may find themselves drowning in debt as a result of their efforts to build resilience.
A new report released at the COP29 climate summit in Azerbaijan by Catholic advocacy groups Caritas Oceania, Caritas Australia and Jubilee Australia found Fiji, Samoa and Tonga are already in debt crises and climate finance could create new crises for other nations too.
In Fiji, the government spends more money each year servicing its existing debt than it does on health or education, let alone climate adaptation. Adaptation spending in other countries is also drowned out by debt servicing costs.
“We have known for a long time that there is a vicious cycle connecting climate impacts and debt distress,” says Tuvalu climate change minister Maina Talia, said at the launch of the report. “When climate-vulnerable countries have high levels of debt, they have to spend more on repayments and less on climate adaptation.
“This makes them more vulnerable to climate disasters and other long-term climate impacts which can cause economic damage as well as social and environmental loss.”
“The economic impacts of climate change then reduce the countries’ income and GDP, making it harder to pay off the existing debt. Often, there is a need to borrow more to repair the damage that has occurred. They then have less and less capacity for climate adaptation, making them more vulnerable to future climate and economic crises.”
There is a US$1 billion gap in climate finance for Pacific countries, the report also found. Finance needs for the Pacific, across reducing emissions, building resilience and recovering from disasters, is in excess of US$1.5 billion a year, but annual finance for the islands ranges between US$200 to $600 million a year.
This gap leads Pacific countries to either take on more debt to meet their needs, or underinvest in adaptation to climate impacts and repairing after extreme weather events.
“Climate impact is a widespread reality across the Pacific, right now. We have worked with communities losing their food sources to changing ecosystems, their fresh water to salination, and even their actual land to the ocean. And with the new cyclone season starting this month, the fear of unprecedented devastation from winds and seas is very real,” Tony Sutorius, the advocacy lead for Caritas Aotearoa New Zealand, told Newsroom.
“Meanwhile, Pacific countries impacted by climate damage are now emerging with debts that are accumulating alarmingly. This has serious implications for the region.”
The Caritas report made three recommendations to help weather what Cardinal Soane Mafi, Bishop of Tonga and Niue, called the “twin storms of debt dangers and climate disasters”.
First, a surge in climate finance to the Pacific, in line with a new global finance goal that is currently being worked out in negotiations at COP29. The report called for at least US$1.5 billion a year, including a ringfenced fund for “loss and damage” or the costs of recovering from disasters.
Second, the finance must come as grants, not loans which further stress Pacific nations already staring down the barrel of debt crisis.
“The New Zealand government has the quite rare distinction that all of our contributions to global climate mitigation remain in the form of grants, rather than loans. We feel this is something to be proud of, and provides New Zealand with real moral authority to lead on the global stage,” Sutorius said, calling on other regional donors like Australia, China and the United States to follow suit.
Third, the report seeks structural changes to the architecture of global finance systems, so the world is better equipped to respond to sovereign debt crises. This would include a system that allows for the cancellation and restricting of unsustainable debt, a new debt sustainability assessment approach and more transparency around the scale and sustainability of debt.
Climate finance is the major focus of the COP29 summit, with countries working to agree a new global goal for the coming years. The report feeds into these discussions, backing calls from developing countries to require grant-based aid and avoid worsening nations’ debt stress through efforts to fund emissions reductions and climate adaptation.
Talia said Tuvalu is not facing the same debt issues as other Pacific countries because it has received its aid in the form of grants.
“The only reasons I can see why other Pacific countries ended up in this debt crisis is in their attempt to respond to the climate crisis. They need financial support, just like us in Tuvalu, in order for them to respond to the climate crisis,” he said.
“In terms of mitigation and on adaptation, we need finance. Without finance, there is no point to us coming to COP29.”