A triple fiscal crisis is jeopardizing climate action

Wealthy countries must act on their climate financing pledges, write Vera Songwe and Guido Schmidt-Traub

A boy helps to clear mud from the street after floods in Massanassa, just outside of Valencia, Spain, Friday, Nov. 1, 2024. (AP Photo/Alberto Saiz)

A recent report by the Independent Expert Group on Debt, Nature, and Climate reveals that many of the world’s 144 developing economies are on an unsustainable fiscal trajectory. On average, these countries spend 41.5% of their budget revenues – or 8.4% of GDP – on debt service, severely limiting their scope for public investments in education, health care, infrastructure, and innovation, which are essential for economic growth.

Without growth and greater fiscal flexibility, repaying sovereign debts becomes unfeasible. Consequently, developing countries urgently require a massive injection of affordable capital and, in some cases, outright debt relief from both international and domestic creditors.