Green finance meeting underscores the issue of debt burdens associated with eco-friendly loan arrangements

Africa's Call for Debt Relief and Climate Justice

Africa, a continent that contributes less than 4% to global emissions, is facing escalating climate shocks while providing trillions in free ecosystem services that stabilize the planet. This stark reality is highlighted in countries such as Mozambique, Malawi, Zambia, and Ghana, where high debt levels restrict their capacity to respond after climate shocks.

The Addis Ababa Declaration, an upcoming event, is expected to stress justice-centered finance and may call explicitly for debt cancellation, concessional finance, and the integration of climate risks into multilateral debt frameworks. This call for action resonates beyond governments, with communities on the frontlines often seeing little of international pledges due to bureaucracy or debt service.

Ethiopian Prime Minister Abiy Ahmed stated at the summit that Africa seeks justice, not charity, and partnership, not pity. Mohamed Adow, Power Shift Africa Executive Director, urged that the summit must resolve the paradox of abundance in the face of lack.

Key Creditor Organizations

The main creditor organizations that African states and their representatives (such as the African Union) turn to are multilateral development banks, the International Monetary Fund (IMF), the Paris Club, and bilateral donors.

Among the multilateral development banks, the World Bank Group, particularly the International Development Association (IDA) for the poorest countries, and the International Bank for Reconstruction and Development (IBRD), play significant roles. The International Monetary Fund is often sought during macroeconomic crises, including climate-induced shocks. The African Development Bank is the most important regional development bank for Africa. Other multilateral development banks, such as the Asian Development Bank (ADB), Inter-American Development Bank (IDB), and European Investment Bank (EIB), also play crucial roles, especially in regional or global programmes.

The Paris Club is an informal group of official bilateral creditor countries (like France, Germany, USA, Japan), that advises on debt restructuring and debt relief for African countries. Bilateral donors like China, the United Kingdom, Norway, and the Netherlands also play a central role as bilateral creditors and development partners. Initiatives like the Heavily Indebted Poor Countries Initiative (HIPC) and the Multilateral Debt Relief Initiative (MDRI) are examples of debt relief programmes.

Concrete Demands of African Negotiators

African states and organizations are pressing these actors to consider climate risks in lending, debt restructuring, and debt relief. Concrete demands include climate-sensitive credit frameworks, debt relief and restructuring programmes in exchange for climate investments (Climate Debt Swaps), longer repayment periods, lower interest rates, and additional, non-repayable grants for climate adaptation and protection. Transparent and fair criteria for assessing debt sustainability, including external climate shocks and losses and damages, are also crucial.

The Way Forward

The World Resources Institute estimates that Africa will need $579 billion for adaptation between 2020 and 2030. To fund Africa's renewable energy plan scaling to 300 GW by 2030, innovative tools that avoid new debt may be employed. The African Leaders' Debt Relief Initiative has already pushed creditors and multilateral institutions to integrate climate risks into lending frameworks.

However, adaptation funds mostly come in the form of loans, which can exacerbate debt burdens. Civil society groups warn that unless wealthy nations deliver real resources in the right form, the continent will be forced to choose between climate survival and debt repayment. Developed countries pledged $300 billion annually at COP29 in Baku, but Africa's negotiators called it insufficient, arguing that $1.3 trillion is needed, with at least $3 trillion required for Africa's full climate response. Climate shocks make debt repayment harder, and analysts say this proves the point: climate finance without debt reform only creates new traps. Many African countries pay more to service debts than to fund health or education.

Former Mauritian President Bibi Ameenah Firdaus Gurib-Fakim is part of the African Leaders' Debt Relief Initiative. By 2024, more than half of African countries were either in debt distress or at high risk of it. The continent loses 5% of its GDP annually to climate disasters, while current flows for adaptation are just a fraction of that. Innovative solutions like the proposal of an African Climate Risk Fund or the demand for an international climate debt relief are being discussed to address these challenges.