The International Monetary Fund (IMF) has called on development banks and multilateral institutions to increase low-interest rate finance for Africa’s climate change measures.
According to the IMF, providing concessional finance to sub-Saharan Africa (SSA), the Fund said, would help meet the climate financing needs and help speed up the green energy transition in the region.
Speaking on the figures and current economic trends, Abebe Aemro Selassie, Director of the IMF’s African Department, noted that it has become urgent for development banks and multilateral institutions to shore up financing.
Abebe Aemro Selassie was speaking at a press conference on the Sub-Saharan Africa Regional Economic Outlook – The Big Funding Squeeze, on the sidelines of the IMF/World Bank Group (WBG) 2023 Spring Meetings. He noted that though the continent is going through many crises, climate crisis must also feature prominently.
“Ensuring that important efforts to tackle climate change do not crowd out basic needs, like health and education. Climate finance provided by the international community must come on top of current aid flows.”
Abebe Aemro Selassie
Abebe Aemro Selassie added that closing the gap requires that the global community considers the critical need for concessional finance in helping the region address climate change and explores ways in which additional flows might be unlocked.
The IMF Director for Africa noted that local public resources are limited, due to practical limits on domestic revenue mobilization, elevated debt levels, tighter global financial conditions, and rising borrowing costs. He explained that concessional finance, by itself, is unlikely to meet the region’s transition and adaptation needs as the amounts required to fund adaptation and mitigation are immense.
Expanding Access to Private Sector Capital
Abebe Aemro Selassie, moreover, stated that concessional funding could play a critical role in expanding access to private sector capital by accelerating high-priority projects to help unlock private investment. He iterated that concessional financing is also critical in ensuring risk-sharing arrangements that addressed the most pressing concerns of risk-averse investors.
Abebe Aemro Selassie, therefore, called on the international community to scale up climate finance for the region, and take steps to ensure that committed funds are used swiftly and effectively.
Providing an update on the region’s economic outlook, Mr Selassie noted that growth in SSA is expected to slow to 3.6 per cent as a “big funding squeeze,” tied to the drying up of aid and access to private finance hit the region.
This would be the second consecutive year of an aggregate decline in SSA growth, which the Director said posed dangers to essential development for countries in the region.
“The shortage of funding would force countries to reduce fiscal resources for critical development like health, education, and infrastructure, holding the region back from developing its true potential.”
Abebe Aemro Selassie
As of 2020, SSA had received $15.7 billion in concessional climate finance but needs $190bn for mitigation by 2030 and $50 billion per year in adaptation costs by 2050.
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