WIN FOR BOTH PARTIES

Kenya asks polluting donors to forgive some debts

The concept has worked for Argentina, which owes billions to various foreign lenders.

In Summary

• The idea is instead of servicing external loans, the Kenyan government makes payments in local currency to climate projects on terms agreed with creditors. 

• Under the Paris Agreement, industrialised nations should actually pay the poor nations for causing climate-related problems such as droughts.

President Uhuru Kenyatta and Treasury CS Ukur Yatani.
President Uhuru Kenyatta and Treasury CS Ukur Yatani.
Image: FILE

Treasury has suggested that some of Kenya’s creditors forego their debts and allow her to reinvest the amount it would pay in environmental projects.

The concept has worked for Argentina, which also owes staggering amounts of money to various foreign lenders.

Treasury CS Ukur Yatani offered this concept, known as debt-for-climate swap, as one way to address climate change in the world.

The idea is instead of servicing external loans, the Kenyan government makes payments in local currency to climate projects on terms agreed with creditors. 

This is a win for both the debtors, such as Kenya and creditors ­— often industrialised countries most responsible for the suffering caused by climate change in poor countries.

Under the Paris Agreement, industrialised nations should actually pay the poor nations for such problems.

Yatani complained the industrialised countries had not fulfilled their promise to mobilise $100 billion (Sh108 billion) per year by 2020 to support poor nations to adapt to climate change.

“Kenya, being an emerging economy, is among countries that are most vulnerable to the impacts of climate change,” he said.

He spoke on Tuesday evening during the meeting of the coalition of finance ministers for climate action.

Debt-for-environment swap is not a new concept. In 2008, Argentina implemented a successful debt-for-environment swap with the United States. 

The deal allowed Argentina to not pay the US some debts and instead reinvested the exact amount of money in environmental protection. 

The face value of debt addressed was $38.1 million and the environmental swap was $3.1 million.

According to the Kenya National Bureau of Statistics, Economic Survey for 2018, the economic cost of climate change in the country is estimated to range between 2 to 2.4 per cent of GDP per year.

“Two cases in point of major climate phenomena in Kenya are droughts that account for eight per cent of GDP every five years and floods which are estimated to cost 5.5 per cent of GDP every seven years,” Yatani said.

Speaking earlier at the same meeting, President Uhuru Kenyatta said the Covid-19 pandemic has worsened the impact of climate change on African economies.

He said the continent's GDP had, for the first time in 25 years, dropped by over three per cent in 2020.

"Multiple systemic shocks are now simultaneously threatening African communities: a health crisis, an economic crisis, and a food security crisis, all compounded by the climate change crisis," President Kenyatta said.

He said Kenya has deployed significant national resources to scale up climate change adaptation efforts.

"Kenya’s updated Nationally Determined Contribution provides a comprehensive overview of adaptation priorities, with an estimated implementation cost of US$ 4.4billion per year," Uhuru said.

"While we can realistically mobilise domestic resources to meet 13 per cent of this cost, we would need our external partners to support us fund the remaining 87 per cent."

 

(edited by o. owino)