Calls for Ireland to support an historic “climate debt swap”

Financial mechanism would allow low-income countries to bring the Sustainable Development Goals back within reach

New Oxfam analysis describes a $27 trillion black hole – accumulating at around $3.9 trillion a year to 2030 – that low-and-middle income countries face to achieve the main Sustainable Development Goals (SDGs) and respond to the climate crisis.

Oxfam calls for rich countries to collectively borrow $11.5 trillion to fund an historic “climate debt swap” with poorer countries, in addition to finally honouring their aid commitments. This would be an essential part of high-income countries compensating for the fact that they have put the vast majority of climate-heating carbon emissions into the atmosphere.

In 2005, Ireland agreed to reach the UN recommended target of spending 0.7% of Gross National Income (GNI) on Official Development Assistance (ODA). Nearly twenty years later Ireland is halfway to reaching this target.

Progressive wealth taxes and Special Drawing Rights (SDRs) would be enough to fund these policies and more. There would even be enough left over for rich nations to make inequality-busting investments at home. Just one measure, a progressive net wealth tax of up to 5%, could add around $1.1 trillion to rich country budgets each year.

Ireland is one of the few high-income countries that has not re-allocated any of our $4 billion allocation of SDRs to low-income countries.

At the same time, a wealth tax on elite Irish wealth at graduated rates of 2%, 3% and 5% above a high threshold of €4.7 million would raise €8.2 billion annually. Potentially this could transform Irish public services in health, housing and education while also delivering on Ireland’s international and climate commitments.

“To anyone who would dismiss an $11.5 trillion climate debt swap as radical, remember that rich countries raised about as much in response to Covid-19,” said Oxfam Ireland’s Head of Policy and Advocacy, Michael McCarthy Flynn

“And for anyone who would dismiss meeting aid promises as unrealistic, remember that rich countries could raise more than $1 trillion each year if they were willing to tax the rich. It all comes down to political will,” he added.

Despite today’s dire reality for the world’s poorest people, rich countries meeting at the World Bank Spring meetings in Washington (April 10-16) are discussing reforms that are likely to unlock only a tiny fraction of what’s needed. Ireland has an outsized role at this meeting with Minister for Public Expenditure, Paschal Donohoe, attending in his role as head of the Eurogroup.

Some initiatives on the Spring meetings table, such as suspending debt repayments if a country suffers a natural disaster like a hurricane or earthquake, or “green bonds” to encourage environmental projects, might be welcome, but they will also be nowhere near enough to meet the need.

“If rich countries like Ireland are serious about investing in people and planet, they would go beyond financial wizardry. Ireland needs to raise its voice in support of radical reform of the IMF. Otherwise, we won’t be able to stave off climate catastrophe and lift everyone out of poverty,” McCarthy Flynn said.

The new World Bank ‘Evolution Roadmap’ process will be another hot topic at the Spring Meetings. Oxfam points out that an Inequality Goal, committing the World Bank to closing the gap between the poorest 40% and the richest 10%, is long overdue. The World Bank’s own analysis shows that extreme economic inequality is a barrier to poverty reduction.

“For the first time in 25 years, extreme wealth and extreme poverty have risen at the same time. 71 million more people were forced into poverty in just four months last year because of food and fuel price hikes,” McCarthy Flynn said.

“Our economic system continues to shovel trillions of dollars into the hands of the wealthiest elite. Billions upon billions of windfall profits, riding on a cost-of-living crisis, have filled the pockets of rich shareholders,” McCarthy Flynn concluded.

ENDS

Contact: Clare Cronin - External Communications Manager, email: clare.cronin@oxfam.org, mobile:+353 (0) 87 195 2551

Notes:

• For full details of all Oxfam proposals including the Climate Debt Swap, see the Oxfam media briefing - False Economy
• Ireland led the negotiations at the United Nations (UN) that agreed the SDGs in 2015, a global framework to end poverty and achieve sustainable development for all by 2030. Ireland is currently co-chairing a UN process to rejuvenate the implementation of the SDGs which are well behind target at their mid-way point.
• For calculations regarding Wealth taxes in Ireland see- https://www.oxfamireland.org/blog/ireland-two-richest-people-have-more-wealth-50-percent-population-poorest-end
• In August 2021, the International Monetary Fund issued $650 billion of Special Drawing Rights (SDRs) to the countries of the world. SDRs are not a currency, but they can be used to bolster countries foreign exchange reserves and provide a needed cushion against international economic shocks. Ireland received over $4 billion in Special Drawing Rights (SDRs).- for more details see https://www.oxfamireland.org/blog/how-budget-2023-can-help-tackle-low-income-countries-fiscal-and-debt-crisis