At the Africa Climate Summit in Nairobi, Kenya, African countries on Tuesday, September 5, called for lower interest rates on debts to adapt to climate change in a climate crisis.
The call is part of the Bridgetown Initiative, a proposal to reform the world of development finance, particularly on how rich countries help poor countries cope with and adapt to climate change.
The Bridgetown Initiative, a three-step proposal seeking to transform the current global financial system, was spearheaded by the Prime Minister of Barbados, Mia Mottley.
Rich countries are able to borrow at interest rates of between 1% and 4%, while it's around 14% for poorer countries. The Bridgetown Initiative proposes the creation of new instruments and reform of existing institutions to finance climate resilience and the Sustainable Development Goals (SDGs).
It sets out three ways to change how development finance works, by encouraging investment from the private sector to unlock climate cash for developing countries.
The first involves changing some of the terms around how funding is loaned and repaid. For example, suspending interest payments on finance while a country is tackling a pandemic or natural disaster would give that nation breathing space to invest in rebuilding.
Secondly, the initiative requires development banks to lend an additional $1 trillion to developing nations for climate resilience. This should include discounted lending.
The third step is to set up a new mechanism - with private-sector backing - to fund climate mitigation and reconstruction after a climate disaster.
Speaking at the Summit, President Paul Kagame said that the Bridgetown Initiative spearheaded by the Prime Minister of Barbados deserves consideration and serious attention.
"Although there is a good sign that the international community is taking seriously the core to reform our global financial architecture, there is still room for improvement," he said.
Any meaningful structural change must favour debt restructuring and lower interest rates, Kagame said.
To mobilize climate finance, he said, Rwanda launched Ireme Invest, a green investment facility.
So far, more than $200 million has been mobilised from domestic and international partners including the European Investment Bank and the Green Climate Fund.
Unfair global financial system
United Nations Secretary-General Antonio Guterres said that now is the time to bring together African countries with developed countries, financial institutions, and technological companies to create a true African Renewable Energy Alliance, saying Africa has received only 2% of global investments in renewable energy over the past two decades.
He said: "And all of that requires addressing another injustice: an outdated, unfair and dysfunctional global financial system."
"On average, African countries pay four times more for borrowing than the United States -- and eight times more than the wealthiest European countries."
Isaias Afwerki, the President of Eritrea, stated: "Africa should mobilise its own resources rather than extend hands for handouts that may aggravate the existing situation. Mobilising our resources will enable and motivate our creativity at the level of the continent. I urge everyone not to be attracted by billions being promised by so-called donors. We should mobilise our own resources and get away from this dependency that will definitely compromise everything on the continent."
Kenyan President William Ruto said that the summit is dedicated exclusively to the transformation of potential into opportunity.
"We are already losing between 5-15% of our GDP growth every year to the adverse impacts of climate change," he said.
Moussa Faki Mahamat, the Chairperson of the African Union Commission, said that adaptation finance in Africa is needed given that agricultural productivity has been reduced by 34% since 1961 due to climate change, putting pressure on food systems in Africa.
"For example, in the 2022/2023 season, about 18 million people were affected by drought in the Horn of Africa alone," he said.