Conflict-ravaged countries pushed into “debt traps” by climate funding

Oxfam found that over half of climate finance reported by rich countries could put fragile states in more debt.

Global climate finance levels are woefully insufficient to keep warming below 1.5°C or protect people from the devastating impacts of climate breakdown —and this gap is particularly evident in countries mired in conflict or that are unable to provide basic services for their communities. 

In a brief published today, “Forgotten Frontlines: Looking at the climate finance going to fragile and conflict affected states in 2019-20,” Oxfam shows that the share of total climate finance provided to fragile and conflict-affected states (FCAS) between 2019 and 2020 was on average $13.64 per person per year. This number drops even lower —to $6.68 per person per year— in countries facing active conflict, leaving conflict-ravaged communities exposed to deadly climate breakdown.

Huge climate financing disparities exist between fragile and conflict-affected states. At the higher end of the scale, Tuvalu received roughly $1,083 per person per year, while Syria received $0.67 per person per year. Overall, the amount of climate finance provided to these climate-vulnerable countries is far below what they need.

Oxfam’s research also finds that more than half of funding provided to FCAS came in the form of loans and other forms of debt financing that will sink fragile states further into debt. In 2022, 78 percent (29 countries) of FCAS were classified at medium to high risk of debt distress, yet almost 10 percent of climate finance provided to them came in the form of non-concessional loans, without any preferential terms such as low interest rates or longer grace period for repayments. Over 41 percent came in the form of concessional loans, which are loans with these preferential terms.

“Climate finance should not be a debt trap for vulnerable countries,” said Safa Jayoussi, Oxfam’s Climate Justice Advisor for the Middle East and North Africa. “Fragile and conflict-affected states should not be paying back rich countries to protect themselves from a crisis they did not create.” 

“Wealthy countries are patting themselves on the back for providing climate funding but most of this money is handed out as loans. Climate breakdown is adding disaster on top of disaster for people already struggling for survival.”

Oxfam estimates that two billion people, a quarter of humanity, live in countries that should not be forced to borrow further due to their levels of existing debt. Making these countries take out loans could lead to further cuts in public spending, which would have devastating consequences for people already living in poverty.

The majority of FCAS are classified as being some of the worst impacted by, yet least ready to respond to, climate-fueled disasters. In Burkina Faso, not only is there a climate emergency, but also compounding crises of two million internally displaced people and a food and security crisis. Communities affected by conflict are the hardest to reach as donors are reluctant to provide financing due to access issues, repayment concerns, and security risks.

Oxfam is calling for more climate funding for FCAS in the form of grants, for climate programming to better embed conflict-sensitivity in their programs, for more finance to go to local organizations, and for stronger collaboration between humanitarian, climate, and peace actors. 

“It’s time to shift away from old funding models which cater to the preferences of donors, and towards solutions based on the needs of affected countries and communities,” said Jayoussi. “We need a new era of climate financing, one that empowers local voices with grant-based finance and ensures sustainable, long-lasting change.”