The Vicious Cycle: Connections Between the Debt Crisis and Climate Crisis. Cover photo by Thoko Chikondi / ActionAid
The Vicious Cycle: Connections Between the Debt Crisis and Climate Crisis. Cover photo by Thoko Chikondi / ActionAid

This is the way the world works. Some of the poorest countries in the world are most at risk from climate change. But because they are so poor they are often massively in debt to western banks who insist on loan repayments at the expense of programmes to develop local infrastructure. The biggest scandal is that there would not be a debt crisis if global corporations paid their taxes in full to the countries whose resources they exploit. ActionAid estimates that tax avoidance and illicit financial flows rob African countries of $100 billion a year.

The World Bank and the IMF insist that debtor countries privatise their public services, cut public spending, and prioritise production of export commodities. This is necessary to earn foreign currency as most of these debts have to be repaid in dollars. Having a weak currency means that, even when you pay enough to cover the loan, it is swallowed up in interest payments and low exchange rates, so the debt is never paid off.

Last month ActionAid International issued a report exposing this scandal that was largely ignored by the media. Even when money to combat climate change is made available, it often comes in the form of loans rather than grants, exacerbating the debt crisis and driving countries to follow policies that contribute to climate change. So, while it was right to oppose Bolsonaro’s policy of deforestation in the Amazon, not many liberal commentators mentioned that debts to foreign banks worth more than 80% of GDP were also a factor in Brazil’s prioritising of soybean exports over the protection of the Amazon.  Mozambique’s external debt equals 101% of GDP which explains why Mozambique has been trying to expand its coal and gas production in recent years. Stories like this are repeated around the world.

While you might expect private banks to put financial consideration above all else, it is shocking to learn that, despite their recent claim to green credentials, the World Bank and the IMF have been pushing needy countries into expanding fossil fuel development. The IMF has ‘advised’ more than 100 countries to expand their fossil fuel infrastructure. The World Bank has spent $14.8bn supporting fossil fuel projects and policies since the Paris Agreement was signed in 2015. 

Dash for Gas

This has led to a new ‘Scramble for Africa’, only now foreign powers are not seeking territorial possessions as they did in the race for empire in the 19th century. They are seeking access to fossil fuels, especially natural gas. This comes at a time when 600,000 Africans have no access to electric power. 900,000 have no access to clean energy for cooking. Meanwhile Europe is the largest consumer of African natural gas products, buying 20% of African production as it weans itself off Russian supplies. Italy is signing deals with Algeria. Norway is active in Nigeria.

It’s not just Western Europe. China, Russia, USA, Japan, Saudi Arabia and the United Arab Emirates are among the powers jostling for influence. China alone is responsible for a third of all the infrastructure projects in sub-Saharan Africa. And in the ‘Dash for Gas’ only 2% of global investment in renewable energy is directed towards Africa.

African countries are not only being ripped off by this process. Nation states are being destabilised as foreign powers are backing rival warlords and dictators in civil wars that add to the misery that climate change has already wrought. Droughts in the Horn of Africa are directly linked to the changing pattern of the monsoons in India. And this part of Africa has suffered more than most from proxy wars in recent years.

The civil war in Sudan is the latest example. Its plans for growth were shattered when South Sudan won its independence after a bitter civil war that left it in control of most of Sudan’s oil reserves. But the people of South Sudan have not seen the benefit of an export trade that provides 95% of the country’s wealth. While foreign contractors control production, most of the people are dependent on humanitarian aid. In the north, the competing generals, who should both be arraigned for war crimes in Darfur, are propped up by foreign powers. The Rapid Support Forces of General Mohamed Hamdan Dagalo have the backing of the United Arab Emirates, in alliance with the Russian Wagner Group. The rival General Abdel Fattah al-Burhan is backed by Egypt. So a conflict rooted in oil and sustained by international rivalries now threatens to destabilise the whole region. This is the way the world works. It works for banks and corporations and powerful nation states. It does not work for us.

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