Statement delivered by H.E Mohamed Nasheed, CVF Ambassador for Ambition, Maldives
V20 MINISTERIAL DIALOGUE IX
16 October 2022
H.E Mohamed Nasheed, CVF Ambassador for Ambition, Maldives
The Chair of the V20, His Excellency Ken, the Ghanian Finance Minister, Madame Georgieva, the Director General of the IMF, Excellencies, Ladies and Gentlemen. It’s very good to be with you. Although I am former President of the Maldives and currently Speaker of the Parliament, I speak to you today in my capacity as the Ambassador for CVF and V20. These are the most climate-vulnerable countries in the world, including my own. Just last month, many of our islands were entirely swept over by waves.
The coral reefs are dying, our infrastructure is being hit by extreme weather, and the winds are getting stronger. Every one of our countries now has a story like this. We are experiencing losses and damages from the climate emergency every day. And yet we have contributed the least to emissions and have the highest vulnerability. Our latest climate vulnerable economies loss report makes clear just how serious our situation is becoming.
Climate change has already eliminated one-fifth of our wealth. In other words, the V20 economies would be 20 percent wealthier had we not been suffering the daily toll of climate change loss and damage. In aggregated dollar terms, this is half a trillion in loss, and for the most at-risk countries, economies’ losses exceed half of all growth since 2000. In recent years, we have lost 1 percent of annual growth.
For the most at-risk V20 economies, the loss exceeds total growth. In other words, they are getting poorer. Much of this climate damage affects assets that we have paid for with loans. So, the wealthy nations lend us money at a high cost of capital due to our risk profile and then the climate damage generated by their historical emissions destroys the same assets. We are left with the debt.
The hospital, the house, the bridge we built with the loans that we took have gone away, but the debt remains. These assets are infrastructures like roads and bridges washed out by floods and storms. Schools and hospitals damaged and destroyed; islands eroded away. Add to the legacy of COVID-19 and we see the debt crisis that is now affecting so many of our members. Just last week, I was asked by the President of Sri Lanka to act as his advisor on climate challenge. And as you know the debt situation there in Sri Lanka is untenable. There is so far no recognition of the role that climate has played in causing it.
Let’s be clear, without a systematic approach to reducing the debt burden of the most climate-vulnerable countries, we face a spiral of collapse. Sri Lanka will be just a start. There would be dominos of default one after the other plunging hundreds of millions in our nations deeper into poverty and conflict. There is, I believe, still time to avoid this outcome, but it requires your leadership and engagement as creditors.
I believe it is better also for V20 nations to act collectively as far as possible in confronting this crisis because finance ministers are understandably reluctant to say things which will hit their credit ratings, but I can. But ignoring the problem will not make it go away. It is the nature of debt to pile up debt upon debt until it is unserviceable and then millions suffer. The V20 nations have nearly half a trillion debt servicing payments due over the next six years when we’ve just lost half a trillion in lost growth from climate damage over the last two decades.
We are living not just on borrowed money, but on borrowed time, and that time, Ladies and Gentlemen, is running out. Perhaps we should simply walk away from these debts given the injustices of the issues and collectively refuse to make payments. That would make this problem for creditors more than the debtors. But I believe there is still the option of cooperation. Madame Managing Director, you made a pledge last year to introduce a debt for climate instrument.
I would like to put our offer to you on behalf of the V20 to devise this rapidly together and have it ready to put on the table for Sharm El Sheikh in less than a month for COP27. This is not much time, but the situation is urgent and the contours of how this might work seem clear. We need debt sustainable analysis followed by debt cancellation and restructuring in exchange for creditor participation in our climate resilience strategies. Give us a haircut and spend that money in our economies on environment projects, and take us to sustainability.
In sort of the loss-loss scenario of default, we could have a win-win scenario where creditors in tacit recognition of their higher emission debts, restructure debt for countries who put themselves on what we call a climate prosperity track. That means we do not want austerity and cuts as part of restructuring, we want stimulus and growth, but clean growth, that puts us on trajectories which are compatible with Paris targets.
I believe our CVF climate prosperity plans can be at the heart of this effort. The former CVF Chair, Bangladesh, has already completed a draft. Sri Lanka likewise is undergoing the process as is my own country, the Maldives, which has conditionally committed to net zero by 2030. Implementing all these plans requires not just debt relief, but new and sustainable investments in clean growth. It means bringing down the cost of capital so these investments can be made and new and restructured debt service sustainability.
I believe that we the V20 with the leadership of the IMF and World Bank can work together to get this instrument ready for COP27. I stand ready personally to assist in any way. Let us work together to fix this crisis before it’s too late. Thank you.