More than 50 of the poorest developing countries are in danger of defaulting on their debt and becoming effectively bankrupt unless the rich world offers urgent assistance.
Head of the UN Development Programme (UNDP) Achim Steiner came up with the statement at the Cop27 UN climate summit, according to a report published by The Guardian recently.
The UNDP head said, “Inflation, the energy crisis and rising interest rates are creating conditions where an increasing number of countries are in danger of default, with potentially disastrous impacts on their people.”
“There are currently 54 countries on our list [of those likely to default] and if we have more shocks – interest rates go up further, borrowing becomes more expensive, energy prices, food prices – it becomes almost inevitable that we will see a number of these economies unable to pay,” he said.
“And that creates a catastrophic scenario – look at Sri Lanka [which has descended into civil strife] with all the social and economic and political implications this carries with it.”
Steiner said any such default would create further problems for solving the climate crisis. “It certainly will not help [climate] action,” he said.
Without measures to help them with debt, he warned, poor countries could not get to grips with the climate crisis.
“The issue of debt has now become such a big problem for so many developing economies that dealing with the debt crisis becomes a precondition for actually accelerating climate action,” he said.
“We need to inject targeted liquidity into countries to be able to invest in energy transitions, and adaptation [to the impacts of extreme weather].”
The climate crisis is further compounding the problem, he warned, as countries are facing increasing effects from extreme weather. Poor countries are not receiving the funding they were promised from the rich world, yet are facing a growing danger of storms, floods, droughts and heat waves.