Bangladesh Faces Climate Debt Crisis: CDRI Sounds Alarm on Potential ‘Debt Trap’

Bangladesh’s Climate Debt Crisis: A Deep Dive

Bangladesh is grappling with a severe climate debt crisis. The recent Climate Debt Risk Index (CDRI) report reveals a risk score of 65.37 out of 100, set to rise to 65.63 by 2031. This score places Bangladesh firmly in the “High Risk” category. Despite being responsible for less than 0.5% of global emissions, the country faces a staggering per-capita climate debt of $79.6.

The Debt-to-Grant ratio is alarming, sitting at 2.7—nearly four times the average for Least Developed Countries (LDCs). Similarly, the multilateral loan ratio is about five times higher than the LDC standard. Adaptation efforts, crucial for combating climate effects, are severely underfunded; the Adaptation-to-Mitigation ratio is only 0.42, less than half the LDC average.

The data shows that for every ton of CO2e emissions, Bangladesh incurs a loan of $29.52. This practice contradicts the “Polluters Pay Principle.” According to Tonmay Saha from the Change Initiative, international climate finance, promised as reparations under the Paris Agreement, has turned into a “climate debt trap.” Over 70% of climate finance comes as loans, burdening countries like Bangladesh with dual payments: ones for disasters and another for debt.

From 2000 to 2023, about 130 million people in Bangladesh faced displacement due to climate hazards, resulting in a loss of $13.6 billion. Households spend around Tk10,700 (approximately $88) annually on self-financed protection, totaling $1.7 billion nationwide.

An overwhelming portion of climate finance, more than half, is focused on energy but is driven by debt with a staggering loan-to-grant ratio of 11.99:1. Other sectors such as transport and water supply also face mostly debt financing. Alarmingly, 18.84% of the reported climate finance has been misallocated to fossil fuel projects, further complicating the situation.

The report calls for a radical shift towards grant-first finance and direct local access to funds. It advocates for reforms at multilateral development banks and proposes creating an Earth Solidarity Fund funded by carbon pricing. In national strategies, it suggests transforming the Bangladesh Climate Change Trust Fund into the Bangladesh Natural Rights Fund (BNRF).

Experts are raising voices for change. Dr. Farhina Ahmed from the Ministry of Environment points out that protecting biodiversity can significantly mitigate climate impacts. Yet, global meetings like COP often fail to yield effective results. Dr. AK Enamul Haque from the Bangladesh Institute of Development Studies emphasizes the need for systemic changes rather than just incremental fixes.

Without firm commitments, initiatives like the $1 billion Climate Finance Action Fund introduced at COP29 risk being merely aspirational. The situation in Bangladesh serves as a wake-up call regarding global climate finance practices—a critical dialogue that needs more attention.

For further information, refer to the original findings by the Change Initiative here.

The crisis in Bangladesh is not just a local issue; it reflects larger global patterns of inequality and climate injustice. As we navigate the complexities of climate finance, it’s essential to ensure that nations most affected by climate change are adequately supported not just with loans but with real, sustained financial aid.

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