Ishaq Dar thanks ADB & the IF-CAP financing partners for organizing this kick-off event of the Innovative Finance Facility for Climate in the Asia and Pacific
BAKU, Nov 12 (SABAH): Foreign Minister Muhammad Ishaq Dar has thanked ADB and the IF-CAP financing partners for organizing this kick-off event of the Innovative Finance Facility for Climate in the Asia and Pacific (IF-CAP). It is inspiring to see such a committed global coalition working together to address the climate crisis.
In a statement, he said, “We welcome the commitment of this forum to innovation in climate finance instruments to unlock available, affordable and accessible climate finance to developing countries. The USD 2.5 billion mobilized in guarantees from IF-CAP partners will unlock USD 11 billion in climate finance to support developing member countries. It will help to promote the means of implementation support at a time when we are negotiating to set an ambitious new quantified climate finance goal (NCQG) based on the needs and priorities of the developing countries.”
He said, “The existing international financial architecture is skewed against climate responsive investment in developing countries. 80% of climate finance remains within developed economies. The cost of finance is also 70 to 80 % higher in emerging markets and developing countries (EMDCs), compared to developed countries. Climate finance is concentrated in mitigation, while adaptation and loss and damage remain underfunded. Moreover, climate finance is primarily delivered in the form of debt which results in another climate finance barrier – currency risk – which is particularly concerning given foreign currency lending makes up 70 to 80% of low-income countries debt. Pakistan supports reform of the MDB’s and the IMF for addressing these challenges being faced by the developing countries, and for scaling up currency risk hedging for low- and middle-income countries.”
He said, “It is critical that instruments such as local currency indexed bonds and currency swaps are encouraged; Debt Sustainability Assessment (DSA) methodology is enhanced to fully reflect climate risks; Climate Resilient Debt Clauses are normalized to include debt relief; and the IMF factors in modern risk management tools in its Debt Sustainability Analysis and Debt Limits. Moreover, we need new financing for climate on highly concessional terms. The credit rating agencies should also refrain from exaggerated risk premiums that drive up the cost of capital in developing countries; arbitrary hurdle rates assigned to developing countries should be reviewed; the IMF should undertake universal climate risk surveillance through its Article IV processes to inject objectivity into risk assessment and pricing.”
He said, “We also encourage bilateral partners, private sector and MDBs for Greening the Debt of Climate Vulnerable Countries, and develop Sustainable Industrial Plans for production and domestic resource mobilization to integrate developing countries in Green Global Value Chains and trade. Pakistan remains among the top ten countries most impacted by climate change. The devastating floods of 2022 contracted Pakistan’s GDP by 4 % and resulted in loss and damages of over USD 30 billion. Pakistan requires USD 348 billion to achieve climate resilience by 2030. Pakistan remains committed to climate action in collaboration with international community.”
“We spend 20 % of annual public sector program on Climate Responsive Public Investment ranging from integrated flood response to investment in renewal energy and climate smart agriculture. Pakistan’s National Climate Finance Strategy aims to utilize climate finance to address both our mitigation and adaptation needs. We have developed a Sustainable Finance Framework to expand our climate financing instruments, into critical climate initiatives and support our transition to a resilient and sustainable economy. We have also developed guidelines for Carbon Market Guidelines to encourage investment in hard to abate sectors,” he noted.
He further said, “In this backdrop, we welcome the IF-CAP enabled project “On Sustainable Aviation Fuel Facility” in Pakistan that aims to support us in both our climate and development priorities, in addition to creating gender-inclusive local employment. Please allow me to thank the ADB and all IF-CAP partners for their unwavering commitment to our region’s climate resilience, and we look forward to engaging further with IF-CAP to support our efforts aimed at improving sustainability and strengthening our resilience to climate disasters for a meaningful change for our people and our planet.”