Climate-vulnerable countries spend nearly 25 times more on debt than climate action – ActionAid report

A new report by ActionAid and Development Finance International (DFI) reveals that climate-vulnerable countries are spending nearly 25 times more on debt repayments than on climate action. The report analysed data on domestic revenues, sovereign debt, national budgets and climate plans in 65 highly vulnerable nations. By 2026, total debt servicing will be nearly four times their education spending, seven times their health expenditure and six times their social protection spending.

On average, these countries allocate 65% of their national revenues to debt servicing, leaving less for climate action and essential services. The report highlights the relationship between climate vulnerability and debt as a "vicious cycle", with climate-related disasters forcing governments to borrow for recovery and reconstruction, leading to austerity measures that cut spending on disaster preparedness, adaptation and green transitions.

Debt cancellation could fund these countries' climate plans six times over and their existing spending on climate, health, education and social protection twice over. Currently, the Global South pays about US$8.8 trillion in debt repayments annually, equivalent to 43.5% of their budget revenues, compared to about US$38 billion in climate finance grants.

The report criticizes loans and other debt-creating instruments used as climate finance, arguing they should be public, grant-based and sufficient to meet the scale of the climate crisis. The report highlights the debt burden in several countries, with Malawi spending 70% of its budget on debt repayments and Senegal allocating only 0.32% to climate activities.

It calls for debt relief, more climate finance grants, a UN framework on sovereign debt, and an increase in grant-based climate finance.