A new report from ActionAid highlights how sovereign debt hinders climate action in the most vulnerable nations. These countries currently spend nearly 25 times more on debt servicing than on climate-related initiatives, with debt payments consuming 65% of their combined government revenue.
The scale of the financial burden is significant, as 93.5% of these nations face debt distress or are at high risk of it. In 2026, the Global South is expected to pay $8.8 trillion in debt repayments, while receiving only $39 billion in climate grants as of 2024.
The report details a cycle where climate disasters force countries to take on new loans for recovery. To generate foreign currency for repayments, governments are often pressured to expand fossil fuel extraction, which further exacerbates environmental damage and climate risks.
Specific examples include Senegal, where debt servicing in 2026 exceeds 96% of government revenue and is more than 600 times the national budget for climate action. The study notes that two-thirds of climate finance from wealthy nations is provided as loans rather than grants.
ActionAid suggests that debt cancellation could provide sufficient funds to cover national climate plans six times over. The organization advocates for a reformed international debt system, grant-based climate finance, and the total cancellation of debt for the most affected countries.
