The world today is facing an unprecedented crisis in which two existential problems are intertwined: the growing debt of developing countries and accelerating climate change. Many countries The Global South finds itself in a situation that experts call „"climate debt trap"“. It is a vicious cycle where climate disasters force countries to borrow for recovery at high interest rates, which in turn limits their ability to invest in resilience to future shocks.

The Vicious Circle: When Disasters Deepen Debt

Developing countries are disproportionately affected by climate change, despite historically contributing the least to it. Extreme weather events, such as floods in Pakistan and hurricanes in the Caribbean, cause huge economic losses. For example, the Dominican Republic saw its debt increase from 68 trillion to 78 trillion GDP after Hurricane Maria in 2017, due to reconstruction costs alone.

These shocks reduce economic growth and tax revenues, while lenders raise interest rates due to higher risk. Climate-vulnerable countries today pay on average 117 basis points higher interest rates than other states. It is estimated that these countries pay $20 billion annually to external creditors just to cover the increased interest costs associated with climate risk.

Africa: Doomed to austerity?

The situation in Africa is particularly alarming. The continent's public debt has more than doubled since 2008. In 2023, African governments spent an average of 13 % of its total debt service expenditure, which is double the level in 2012. More than half of African countries now spend more on interest payments than on health care.

Sub-Saharan Africa’s climate finance needs are estimated at $1.4 trillion this decade, but actual flows are only a fraction of that. Moreover, more than half of this financing comes in the form of loans, not grants, further exacerbating the debt situation. Africa is thus left with a paradox: it needs to invest in resilience to survive, but the money it could use to do so is being diverted to repay old debts.

The concept of climate debt and historical responsibility

From a moral and political perspective, the term is increasingly being used „"climate debt"“. This is the debt that developed countries (the Global North) owe to the developing world for the damage caused by excessive historical greenhouse gas emissions. This concept includes two pillars:

1. Adaptation debt: Compensation for the damages faced by poorer nations due to the industrial development of the rich.
2. Issue debt: Responsibility for the overuse of the atmosphere's "carbon space".

While developing countries demand reparations and debt forgiveness as an act of justice, developed nations often resist taking legal responsibility for their ancestors' emissions.

The Fossil Fuel Trap: Debt vs. Decarbonization

The desperate effort to repay debts led to the emergence of the so-called. „"fossil fuel traps"“. Many countries are forced to invest in oil, gas or coal projects to generate the foreign exchange needed to service their debt. For example, Argentina is promoting fracking in the Vaca Muerta oil fields with IMF support to alleviate its debt crisis. However, this approach is counterproductive: not only does it destroy the environment, it often fails to deliver the expected profits and locks countries into an outdated energy model.

Solutions: Swaps and financial architecture reform

Experts suggest several tools to break this cycle. One of the most promising is climate resilience debt swaps (debt-for-climate-resilience swaps). This mechanism allows replacing old expensive debt with new, lower-cost credit, with the saved funds being compulsorily invested in pre-defined climate projects. The G7 group presented a plan in 2025 to standardize these instruments to make them more accessible to low-income countries.

The next step must be to reform the IMF’s Debt Sustainability Analysis (DSA). Current models often ignore climate risks and investment needs to achieve the Sustainable Development Goals (SDGs). If these factors were taken into account, the path of many countries would be found to be unsustainable in the long term. One solution could be to introduce „"adaptation-sensitive credit ratings"“, which would positively reflect countries' efforts to build resilience, thereby making loans cheaper for them.

Social justice and the Slovak context

Climate transformation is not only a technical but also a deeply social process. Research „"Slovak Climate 2025"“ showed that support for environmental measures decreases when people feel economic insecurity. Most Slovaks perceive a deterioration in their standard of living and fear that the green transition will only bring higher costs.

Linking the climate agenda with social protection is therefore essential for success at both global and local levels. Trade unions and civil society emphasize that the fight for climate must not be waged at the expense of the most vulnerable groups, whether they are people in sub-Saharan Africa or low-income households in Central Europe.

Conclusion The path to climate justice is through debt justice. Without a systemic change in the international financial architecture, the Global South will remain trapped in an endless cycle of debt and repayment.

Imagine a developing country as a runner trying to reach a goal called „a sustainable future.“ But climate change keeps throwing obstacles in its path, and its creditors keep throwing more stones in its backpack in the form of interest for every stumble. If we don’t help it unload these stones, it will never reach its goal and will collapse under their weight right on the track.