Debt is a major, but fixable, barrier to climate action. Action on debt could be one of the most impactful and achievable climate solutions available.
The debt and climate crises are deeply interlinked, trapped in a toxic relationship in which countries and communities on the front lines of the climate crisis are paying the price. The global debt crisis is being felt acutely by the most climate-vulnerable countries, where climate disasters are taking place with increasing frequency and intensity.
Countries on the front lines of the climate crisis are forced to spend so much of their national budgets on sovereign debt repayments that these finance flows are driving fossil fuel expansion, preventing climate action and sustainable development, and leaving communities highly exposed to increasing climate impacts.
The vicious cycle between the debt and climate crisis is getting worse year on year, causing rising emissions, accelerating climate disasters, stifling climate action and leading to ever-deepening debt crises.
ActionAid’s new report “Debt Fuels the Climate Crisis: How the finance flows” uncovers the data connecting the climate and debt crises. Available data shows:
- 93.5% of the top one-third of climate-vulnerable countries are in, or at risk of debt distress
- Climate vulnerable countries are spending nearly two thirds (65%) of national revenue on debt servicing, leaving little left to spend on climate, health, education or other public services
- Climate-vulnerable countries are forced to spend nearly 25 times more of their national budgets on debt repayment than on climate action
- Debt repayments by the Global South are nearly 225 times the grant-based climate finance received from the Global North.
This is the fourth of ActionAid’s annual “How the Finance Flows” flagship report series examining finance flows relating to climate change. Previous reports examined how global banks finance fossil fuels and industrial agriculture in the Global South (2023), public funds and subsidies supporting these sectors (2024), and the limited climate finance reaching just-transition approaches (2025).