Debt-Fossil Fuel Trap Report

Debt-Fossil Fuel Trap Report

News: The Debt-Fossil Fuel Trap report has been released by the anti-debt campaigner’s Debt Justice and partners in affected countries.

What is Debt-Fossil Fuel Trap?
• It refers to a situation where countries, particularly those in the Global South, are caught in a cycle of heavy debt burdens and continued reliance on fossil fuel industries for revenue generation.

Key Findings:
• Debt-Reliant Economies and Fossil Fuel Dependence - Poor countries burdened with heavy debts are compelled to rely on fossil fuel revenue to repay loans borrowed from wealthier nations, multilateral creditors like the World Bank and IMF, or private lenders.
• Surging External Debt Payments in Global South - The external debt payments of Global South countries have surged by 150% between 2011 and 2023, reaching the highest levels in 25 years.
• Natural Disasters Escalate Debt-to-GDP Ratio - After events like natural disasters, countries can see their debt as a percentage of GDP rise significantly, such as Dominica’s experience after Hurricane Maria in 2017.
• Surging External Debt Payments in Global South - The external debt payments of Global South countries have surged by 150% between 2011 and 2023, reaching the highest levels in 25 years.
• Resource Backed Loans (RBLs) - Resource backed loans (RBLs) are a mechanism through which repayment is tied to natural resources or future income streams derived from those resources.

Key Recommendations:
• Implement comprehensive debt cancellation for countries in need, across all creditors, without imposing economic conditions.
• Transition to Clean energy
• Ensure that financing and investments align with environmental and social sustainability, rather than contributing to fossil fuel dependence
• Wealthy governments and institutions should play a role in supporting countries to exit the debt-fossil fuel trap.