Hit by COVID and climate change, island states grapple with debt crisis

BARCELONA (Thomson Reuters Foundation) – As the coronavirus pandemic compounds economic pressures from the impacts of climate change, small island developing nations on Monday appealed for international financial support to help them avert a debt crisis imminent.

Ahead of the United Nations General Assembly this month, the Alliance of Small Island States (AOSIS) stepped up diplomatic pressure, calling on donor governments and development banks to provide debt relief, aid and climate finance to its members, which include 44 small island and low-coastal developing states.

Lois Young, Belize’s permanent representative to the United Nations and president of AOSIS, told reporters that island nations were already burdened with unsustainable levels of debt before the COVID-19 crisis, and now the situation was worse. .

“SIDS (Small Island Developing States) are sinking, and it’s not just due to sea level rise and climate change. We are sinking deeper into debt,” she said.

“COVID and the collapse of the tourism sector – basically they just pushed us over the edge.”

In a debt statement, released in late June, AOSIS members said their economies – many of which depend on tourism for up to 40% of GDP – were “in freefall”.

Some would see their gross domestic product contract by 8-15% or more in the second half of 2020, he predicted.

The crisis would reverse “decades-long” development, and without action to relieve financial pressure, SIDS risked “a protracted debt crisis”, he warned.

The document, which serves as the basis for ongoing diplomatic negotiations, notes that the external debt of SIDS reached $50.4 trillion in 2019, up from $29.3 trillion in 2009.

The island states’ external debt rose from 51% of their combined GDP in 2009 to 61% a decade later, before the pandemic hit.

Marla Dukharan, a Caribbean economist who advises governments and central banks in the region, said the reasons for the debt varied but included costly natural disasters increasingly hitting island states.

Other drivers were the inefficiency of providing public services to small populations in remote archipelagos, the need to import many goods consumed on the islands, and the need to earn foreign currency to pay for imported goods.

“Because of all these factors, we are struggling,” she said.

The storm-hit Bahamas risked defaulting on debt by next year, she added.

TOO RICH FOR HELP?

AOSIS calls for an international agreement that would provide debt relief and increase financing to build members’ resilience to climate change and other shocks and stresses.

A major hurdle, however, is that many island states in the Caribbean, Pacific and beyond are ineligible for the debt suspension programs announced for poor countries during the COVID-19 pandemic, as they are countries middle income.

Young and others argued that the islands should get similar help as they face growing threats from hurricanes and other extreme weather conditions, to which they must urgently adapt.

Tina Eonemto Stege, climate envoy for the Marshall Islands, said global warming was already causing “loss and damage” in her Pacific island nation.

Schools and hospitals have to close due to wild weather and rising seas, and salt water bubbles up in his brother’s front yard during high “royal” tides, killing plants and threatening his home, a- she declared.

“We refuse to be swept away by the tide,” she said. “We know what we all need to do to prevent this crisis.”

She and Young called on all governments — especially big carbon emitters — to deliver on their promises under the 2015 Paris Agreement to deliver more ambitious national climate action plans by the end of the day. end of this year.

There are widespread fears that the deadline could slip, due to the postponement of this year’s United Nations climate summit by a year due to the global pandemic.

Stege also said the pledge by rich countries to raise $100 billion a year from 2020 to help vulnerable states develop cleanly and adapt to climate impacts was a “minimum”, but even that did not. had not yet been done.

She called for support for “creative measures” for SIDS, including debt relief and other forms of concessional financing, to address the broader issues revealed by the COVID-19 crisis.

“We really need a comprehensive plan and a very thorough review of SIDS vulnerabilities,” she added.