The world’s multi-lateral banks have “demonstrably failed” low and middle income countries when climate disasters hit and need to better assess their vulnerability and resilience when offering support, the head of the Commonwealth told Reuters.
Pressure on development finance institutions such as the World Bank has grown over the last year amid concern not enough money was being funnelled to developing countries to help them prepare for and withstand the impacts of global warming.
U.S. climate envoy John Kerry said in a side event at the COP27 climate talks in Egypt on Tuesday that he wanted a plan to reform the lending practices of the banks to be ready by early next year.
As secretary general of the Commonwealth, a voluntary association of 56 countries that evolved out of the British Empire, Patricia Scotland said the current global financial architecture was not fit for purpose.
“We have to think again; we cannot continue with the old structure because the old structure has demonstrably failed,” she said, calling for a greater focus on the link between climate change and debt levels.
While in the past, fiscal prudence was seen as the best way to manage and grow a country’s economy, thereby meeting the needs of the people, climate change had upended the calculation.
“You could have been as prudential as you wished. You could have been as fiscally tight as you wanted. Go tell that to the hurricane. When the hurricane hits you and takes away 226% of your GDP and you go from a middle income country to a no income country, that’s got nothing to do with fiscal rectitude.”
The Commonwealth, which emerged after World War Two, presents itself as a partnership of equals.
To help better assess the vulnerability of countries to shocks including climate disasters, the Commonwealth had created the Universal Vulnerability Index, Scotland said, urging the World Bank and others to use it in their decision-making.
Rather than assessing a country’s state of development, and any likely financial assistance, through the lens of Gross Domestic Product, Scotland cited recent destructive flooding in Pakistan as an example of why it was important to factor in climate vulnerability as well.
“Many of the middle income countries are acutely vulnerable to climate, and Pakistan… (is) an example of that.
“Pakistan would be considered too big, too prosperous. It has 172 countries underneath it (in terms of economic output), but it’s the fifth most vulnerable to climate; and that middle income status did not protect them from the monsoons.”
“It didn’t protect them, and it didn’t protect the people who died either. So we have to think again.”