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Climate imperative: G7 leaders can unlock financing for Africa
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Context
Africa is facing severe impacts from climate change, including extreme weather events and natural disasters. These challenges exacerbate existing vulnerabilities and demand urgent global financial and policy responses.
Climate Change Ravaging Africa:
- Unprecedented Extreme Weather:Africa is experiencing extreme weather and natural disasters at an unprecedented scale due to climate change. Kenya recently suffered its longest drought on record, followed by devastating floods affecting over 800,000 people.
- Jeopardizing Water Supplies:Climate change is driving droughts in Africa, jeopardizing water supplies, ruining lives and livelihoods, crippling food production, and destroying homes and infrastructure.
- Forced Migration:Climate change affects migration patterns and exacerbates conflicts, forcing entire populations to flee in search of alternative livelihoods for survival.
African Countries’ Financial Struggles:
- High Interest Rates:African countries pay interest rates up to eight times higher than those attached to the typical World Bank loan, leaving them less equipped to deal with climate-related challenges.
- Perpetual Debt Cycle:Many African nations are trapped in a perpetual cycle of debt, with little or no fiscal space for development and investments in climate-change mitigation or adaptation.
- Plummeting Financial Transfers:Net financial transfers to developing countries plummeted from a peak of $225 billion in 2014 to $51 billion in 2022; and in 2023, $74 billion in interest payments left International Development Association (IDA) countries for wealthier donor countries.
Call for Global Financial Architecture Reforms:
- Urgent Reforms:Africa and the rest of the developing world have been calling for urgent reforms to the global financial architecture.
- Role of G7 and G20:The G7 and G20 are urged to take necessary steps in this direction. As a major shareholder in the multilateral development banks, the United States can help lead the way.
- Equal Access to Equity:A fair financial system would grant all countries equal access to equity. One readily available way to do this would be to reallocate Special Drawing Rights (SDRs) to the African Development Bank.
UPSC Mains Questions:
Q. Discuss the impact of climate change on the socio-economic stability of African countries. How can global financial reforms assist in mitigating these impacts?
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