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The countries that are most vulnerable to the climate crisis are also facing a debt crisis – and the need to service external debt in foreign currency has become a major accelerator of the climate crisis. There is a vicious cycle between the debt and climate crises, each reinforcing the other. It is thus profoundly contradictory that more than two-thirds of climate finance arrives in the form of loans that serve to exacerbate this debt crisis, forcing countries into actions that entrench the climate crisis. The real value of these loans is often over-stated and yet, alarmingly, many of the proposals presently being considered for expanding climate finance seem to be focused on even more loans – rather than exploring fairer and more sustainable alternatives.

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Date published: April 2023
Number of pages: 8