Our award-winning reporting has moved

Context provides news and analysis on three of the world’s most critical issues:

climate change, the impact of technology on society, and inclusive economies.

Hit by COVID and climate change, island states battle debt crisis

by Megan Rowling | @meganrowling | Thomson Reuters Foundation
Monday, 14 September 2020 17:27 GMT

FILE PHOTO: A destroyed dock is seen at a marina after Hurricane Dorian hit the Abaco Islands in Marsh Harbour, Bahamas, September 11, 2019. REUTERS/Marco Bello

Image Caption and Rights Information

'(We) are sinking, and it's not due to just the sea level rise and climate change. We are actually sinking in debt,' says chair of island alliance

Coronavirus is changing the world in unprecedented ways. Subscribe here for a briefing twice a week on how this global crisis is affecting cities, technology, approaches to climate change, and the lives of vulnerable people.

By Megan Rowling

BARCELONA, Sept 14 (Thomson Reuters Foundation) - As the coronavirus pandemic compounds worsening economic pressures from climate change impacts, small island developing nations on Monday appealed for international financial support to help them avert a looming debt crisis.

Ahead of this month's U.N. General Assembly, the Alliance of Small Island States (AOSIS) has stepped up diplomatic pressure, calling on donor governments and development banks to provide debt relief, aid and climate finance for its members, which include 44 small island and low-lying coastal developing states.

Lois Young, Belize's permanent representative to the United Nations and chairwoman of AOSIS, told journalists island nations were already weighed down by unsustainably high debt levels before the COVID-19 crisis, and now the situation was worse.

"SIDS (small island developing states) are sinking, and it's not due to just the sea level rise and climate change. We are actually sinking in debt," she said.

"COVID and the collapse of the tourism sector - basically, they just pushed us over the edge."

In a statement on debt, released in late June, AOSIS members said their economies - many of them reliant on tourism for up to 40% of GDP - were "in freefall".

Some would see their gross domestic product contract by 8-15% or more in the second half of 2020, it predicted.

The crunch would reverse development "by decades", and without action to relieve the financial pressure, SIDS risked "a protracted debt crisis", it warned.

The document, which is the basis for ongoing diplomatic negotiations, noted that SIDS' external debt reached $50.4 trillion in 2019, up from $29.3 trillion in 2009.

The island states' external debt rose from 51% of their combined GDP in 2009 to 61% a decade later, before the pandemic hit.

Marla Dukharan, a Caribbean economist who advises governments and central banks across the region, said the reasons for the debt varied but included costly natural disasters increasingly hitting island states.

Other drivers were the inefficiency of providing public services to small populations in remote archipelagos, having to import many of the goods consumed on the islands, and needing to earn foreign currency to pay for imported goods.

"Because of all these factors, we are struggling," she said.

The storm-hit Bahamas was at significant risk of defaulting on its debt by next year, she added.


AOSIS is calling for an international agreement that would provide debt relief and increase financing to build members' resilience to climate change and other shocks and stresses.

One major barrier, however, is that many island states in the Caribbean, the Pacific and beyond do not qualify for debt suspension programmes announced for poor nations during the COVID-19 pandemic because they are middle-income countries.

Young and others argued islands should get similar help as they face growing threats from hurricanes and other extreme weather, to which they urgently need to adapt.

Tina Eonemto Stege, climate envoy for the Marshall Islands, said global warming was already causing "loss and damage" in her Pacific island nation.

Schools and hospitals are having to close due to wild weather and rising seas, and salt water bubbles up in her brother's front yard during large "king" tides, killing plants and threatening his home, she said.

"We refuse to be swept away by the tide," she said. "We know what we all need to do to prevent this crisis."

She and Young called on all governments - especially major carbon-emitting nations - to stick to their promises under the 2015 Paris Agreement to deliver more ambitious national climate action plans by the end of this year.

There is widespread concern that deadline will slip, due to the postponement of this year's U.N. climate summit for a year because of the global pandemic.

Stege also said a pledge by rich nations to raise $100 billion a year from 2020 to help vulnerable states develop cleanly and adapt to climate impacts was a "minimum", but even it had yet to be delivered.

She called for support for "creative measures" for SIDS, including debt relief and other forms of concessional financing, to address the wider problems revealed by the COVID-19 crisis.

"We really need a comprehensive plan and a very deep look at the vulnerabilities that SIDS have," she added.

(Reporting by Megan Rowling @meganrowling; editing by Laurie Goering. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org/climate)

Our Standards: The Thomson Reuters Trust Principles.