Vulnerable Countries Spend Nearly 25 Times More Repaying Debt Than on Climate Action

The world's most climate-vulnerable nations are spending nearly 25 times more on servicing their debts than on addressing the climate emergency, an ActionAid International report released Wednesday revealed, underscoring what the advocacy group called a "vicious cycle" of debt, disasters, and underinvestment.

The report, "Debt Fuels the Climate Crisis: How the Finance Flows," examines government revenues, debt payments, national budgets, and climate plans in the 65 countries considered most vulnerable to climate change. The authors found that debt servicing consumes 65% of these nations' combined government revenue, while 93.5% of the countries are either in debt distress or facing a significant risk of it.

"Climate-vulnerable countries are being forced to spend nearly 25 times as much on repaying debt as on climate action," the report states. "Indeed, in 2026 total debt servicing on external and domestic debt in these countries is nearly four times that of spending on education, nearly seven times that of health, and nearly six times that of social protection."

The disparity is even greater when comparing debt payments with climate grants. ActionAid estimated that countries in the Global South will make approximately $8.8 trillion in debt repayments in 2026, compared with just $39 billion in grant-based climate finance received in 2024—a ratio of roughly 225 to 1.

"For too long, the debt and climate crises have been treated separately," ActionAid International secretary-general Arthur Larok said in a statement. "This research exposes how tightly they are connected and quantifies the devastating cost involved. Yet this is a crisis we can fix."

The report—whose release coincides with the Global Week of Climate Action—highlights how climate disasters frequently force already indebted nations to borrow even more money for recovery and reconstruction. Subsequent debt payments and austerity measures forced upon them by global financial institutions like the International Monetary Fund (IMF) and World Bank then restrict their spending on climate resilience, public services, and clean energy transitions.

As the report notes:

Even though the IMF recognizes that there is a "development crisis," the IMF refuses to even talk about a systemic debt crisis—because for them and their shareholders, there is no systemic crisis so long as there is no significant default and creditors are being paid. Moreover, the IMF thrives on countries needing to come to them for bailout loans, as this expands their own power and influence. The IMF is both a creditor and a debt collector, serving its own interests and those of its main shareholders in the Global North—making it both judge and jury when it comes to debt renegotiation processes.

The report also details how Global South governments under pressure to generate foreign currency can expand fossil fuel extraction and industrial agriculture, potentially worsening the climate pressures that contributed to their debt in the first place.

“Debt is a triple whammy for the climate: It drives fossil fuel and industrial agriculture expansion, blocks vital climate action, and leaves communities dangerously exposed when disasters strike," ActionAid International global climate justice lead Teresa Anderson said Wednesday.

"This is a toxic relationship," she added. "Countries borrow to rebuild, austerity weakens their resilience, and repayment pressures push more extraction, fueling the next disaster. We need a breakup: Cancel unjust and unsustainable debt, stop making countries borrow to survive climate impacts, and deliver climate finance as grants rather than loans. This vicious cycle can and must be broken.”

“Debt is a triple whammy for the climate."

In Senegal, the imbalance is particularly stark. ActionAid said the government is spending $605 on debt servicing for every $1 budgeted for climate action, while debt payments consume more than 96% of government revenue.

"Behind these figures are impossible choices between servicing debt and investing in agroecology, public services, and climate resilience," ActionAid Senegal director Khaita Sylla said Wednesday. "Women and girls who bear the brunt of climate impacts are then disproportionately affected by cuts in public services even as they lead solutions for a more resilient future.”

ActionAid is calling on governments and international institutions to take steps including:

• Canceling unpayable or unjust debt for countries spending more than 10% of their revenues on external debt repayments;
• Agreeing on a universal rule enabling the suspension of debt payments for any country hit by a climate disaster;
• Creating a United Nations Framework Convention on Sovereign Debt that gives indebted countries an equal voice;
• Requiring private creditors to take part in meaningful debt restructuring;
• Regulating credit rating agencies to remove conflicts of interest and bias;
• Ensuring that climate finance comes in the form of grants, not loans or any other debt-creating financial instruments;
• Reforming debt-sustainability assessments so that climate responses, public services, and human rights are central to decisions about what countries can afford to repay; and
• Conducting public debt and climate audits in countries facing debt crises to examine how domestic and external debt deepen climate impacts, poverty, and exclusion—particularly for women and girls—and identify actions to break the cycle.

“Rich countries like the US have outsized global financial power," ActionAid USA executive director Niranjali Amerasinghe said on Wednesday. "Their lack of willingness to provide climate finance at scale and relieve the debt burden of climate-vulnerable countries is unconscionable."

"There are trillions for defense budgets," Amerasinghe added, "but peanuts for the biggest existential crisis of a generation.”