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International Monetary Fund. African Dept.

Addressing Climate Change in Mauritius: Financing and Reform Options 1 This paper reviews the financing and reform options to address climate change adaptation and mitigation in Mauritius. It finds that there is a significant financing gap to meet the authorities’ 2030 climate targets. The total financing gap represents 1.6 percent of GDP per year through 2030, with a higher share for adaptation than mitigation. Given Mauritius’ limited fiscal space and elevated debt vulnerabilities, fully financing adaptation and mitigation will require a mix of external

International Monetary Fund. African Dept.

Abstract

Sub-Saharan Africa is facing an unprecedented health and economic crisis that threatens to throw the region off its stride, reversing the encouraging development progress of recent years. Furthermore, by exacting a heavy human toll, upending livelihoods, and damaging business and government balance sheets, the crisis threatens to retard the region’s growth prospects in the years to come. Previous crises tended to impact affect countries in the region differentially, but no country will be spared this time.

International Monetary Fund

chlorofluorocarbons 10 years before the deadline in the Montreal Protocol. Yes, we are a very small country and our greenhouse gases are negligible, as is our contribution to climate change. But we want to show that if the Maldives can do it, why can’t the rest of the world? We are not here to tell a story that we’re just victims. We are also willing to lead by example. F&D: When it comes to financing adaptation measures, how has the pandemic hindered efforts? AS : Twenty-eight percent of our GDP is directly related to the tourism industry. Sixty percent of our foreign exchange

International Monetary Fund. African Dept.

overview of how climate change affects sub-Saharan African countries, focusing on the consequences for economic growth and inequality. The second section highlights the key policy areas most effective in building resilience and coping mechanisms, relying on econometric analysis of macro-level data, household surveys, and case studies. The third section concludes with an analysis of financing implications. Main Findings Financing adaptation to climate change will be more cost-effective than frequent disaster relief. For sub-Saharan Africa, adaptation will be

International Monetary Fund. Western Hemisphere Dept.

on the agricultural, cattle and energy sectors. Honduras continues making substantial investments to restore its forests and build climate-resilient infrastructure. The authorities remain committed to create buffers in the national budget for this purpose, but it is critical to secure access to grants and concessional green funds to continue financing adaptation and mitigation measures, and climate change interventions, including water management and food security. Final Remarks During the last six years, Honduras has made significant strides in: reducing

International Monetary Fund

yield high returns. It can unlock private capital, including through reducing risk and damage from disasters; limit disaster recovery spending and debt distress; and ensure a quicker rebound in economic activity. But financing adaptation measures is particularly important, given the sheer scale of infrastructure needs for many countries. Revenue mobilization and spending prioritization and efficiency will have to play a role in easing growth-debt trade-offs. For the most vulnerable low-income and Pacific island countries with limited fiscal space, meeting adaptation

Ulrich Volz

matter of life and death for these countries. Unfortunately, climate-vulnerable developing economies are those struggling the most to finance adaptation and resilience. These economies are particularly exposed to climate-related financial risks, and both governments and firms are already facing a climate risk premium on the cost of capital ( Kling and others 2020 ; Beirne, Renzhi, and Volz 2020 ). There is a real danger that climate-vulnerable developing economies will enter a vicious circle in which greater climate vulnerability raises the cost of debt and diminishes