Monday, November 4, 2013

Debt for climate adaptation exchanges can work for small island developing states

The Jamaica Observer: Small island developing states (SIDS), among which Jamaica is classified, are suffering from two major problems, one, which in the short term will sink them economically, and the other, which will eventually sink them, or at least large parts of them, physically. The first is debt and the second is climate change. The SIDS are heavily indebted, with most of them having debt/GDP ratios of over 60 per cent and many with over 100 per cent.

...If the SIDS are to survive, they must spend substantial sums of money quickly to take action to protect themselves and delay the impact of the inexorable rise of the sea level.

The problem is that debt repayment demands such a large share of the government's budget and a significant share of foreign exchange that there is hardly any prospect of economic growth. A vicious cycle of impoverishment is entrenched in which debt prevents growth, and the lack of it, in turn, prevents debt repayment. Meanwhile, climate change is having an adverse impact on resources, eg beaches, and economic activity such as tourism.

The obvious solution is foreign assistance from the international development institutions and the developed countries to bail out the SIDS. In these days of a prolonged global economic crisis nobody is giving away aid or granting debt cancellation.

The solution to the problem of the debt-strapped, climate-affected SIDS is debt for adaptation exchanges. There are two types, the first involving commercial or private debt owed to banks and bondholders and the second, bilateral debt owed to governments....

Sunset on the sea at Seven Mile Beach, Negril, Jamaica. Shot by Chaoleonard, Wikimedia Commons, under the Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license

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