IMF, AfDB experts underscore urgency of addressing Africa’s $108bn climate finance shortfall

By Onome Amuge

African countries receive $18.3 billion worth of fundings annually to curb the devastating effects of climate change, but the continent currently faces a financing gap of $108 billion annually from the $1.6 trillion needed between 2022 and 2030 to meet the Nationally Determined Contributions (NDCs) to address climate change.

Experts from the African Development Bank (AfDB) and International Monetary Fund (IMF) disclosed this during a panel discussion on the AfDB’s 2022 African Economic Outlook hosted by the IMF in Washington, D.C.

The 2022 African Economic Outlook, tagged “Supporting Climate Resilience and a Just Energy Transition in Africa”, highlighted climate change as a growing threat to lives and livelihoods in Africa.

Stressing the urgency of mobilising climate financing for Africa, the experts noted that with current trends, Africa’s NDCs will not be achieved until critical actions are made towards sourcing finance.

In his presentation, Kevin Urama, AfDB’s acting chief economist and vice president, said Africa has huge comparative advantages to lead the world in the new green transition, but lacks the capital to do so.

Urama emphasised that the findings of the 2022 African Economic Outlook show that the structure of climate finance is very complicated and creates a misallocation of resources.

“One fundamental, existential issue for Africa is climate change. The countries that are receiving climate financing are the less vulnerable ones,” Urama observed.

He added that as a result, the main objective of climate finance to support climate-vulnerable countries is not being achieved.

In his conclusion, Urama stressed the need for a different approach to solving the climate challenge in Africa.

“What I see are opportunities to do things differently so that we are not using an old map to chart a new world. This will include tradeoffs,” he said.

The AfDB vice president also emphasised the relevance of working together as a global community to solve the global common challenges for both the present and future generations.

Also speaking, Abebe Selassie, director of the African Department at IMF, remarked that African policymakers face the unenviable task of needing to invest trillions of dollars in important energy transitions that the region needs to advance its development.

“At the same time, they are being asked to think about the adverse effect that this may have on climate change, but advanced countries who benefitted from climate unfriendly policies are unwilling to support development in the region. This is one issue that policymakers raise with us when we engage with them on the financing challenges they face,” Selassie said.

Selassie further described the findings of the 2022 African Economic Outlook as “sobering”, noting that it raised some profound issues.

James Roaf, IMF’s assistant director in the Fiscal Affairs Department and climate change policy coordinator, identified adaptation as the biggest issue for Africa.

According to Roaf, the African Economic Outlook rightly stresses the need to integrate climate objectives in overall sustainable development pathways.

“We need to focus on making the most of the opportunities that the clean energy transition offers so that climate mitigation and adaptation policies come hand in hand with rising prosperity,” he said.

He further drew attention to what countries can do themselves to maximize climate finance and make the best use of it.

“Mobilising the private sector is critical, with policies such as carbon pricing to encourage investment in renewables, or improving adaptation incentives by reinforcing property rights or strengthening regional trade,” he suggested.