A new report has revealed how financially devastating climate disasters are for small island economies, with many Pacific nations taking on costly debt to cover them. Source: Caritas Australia.
In the Pacific, economic losses from a single cyclone can reach 30–50 per cent of gross domestic product (GDP). By contrast, Australia’s Black Summer bushfires in 2020 cost an estimated $100 billion, or 4.92 per cent of GDP that year.
That means a single cyclone in the Pacific can represent the economic equivalent of weathering six Black Summer bushfires, a staggering burden for small island economies.
Vanuatu, for example, it is hit by 2–3 cyclones that make landfall each year.
On top of this, Pacific nations are spending 15 per cent or more of their government revenue on debt servicing, which is the total paid annually to cover both principal and interest on loans. That’s money that could otherwise go to health, education, or climate resilience.
The report, Rising Tides, Rising Debt, released at the COP30 conference in Belém, Brazil, by Caritas Australia, Caritas Oceania, and Caritas Latin America & the Caribbean, reveals this is not an isolated experience.
It is a shared crisis across the Global South, where climate vulnerability and sovereign debt reinforce one another in a destructive loop.
“The brutal truth is that countries on the frontlines of climate change are paying twice for damage they did not cause,” Caritas Australia chief executive Kirsten Sayers said.
“First, they pay to respond to disasters by rebuilding homes, repairing infrastructure, and providing emergency relief. Then they pay again through the debt they take on to fund that response.
“This deepens their vulnerability and leaves them even less prepared for the next shock.”
The relatively weak financial position of many small island nations means they often borrow at high interest rates or under tough conditions. In turn, investment into climate adaptation, which is meant to reduce vulnerability, becomes itself a source of economic fragility.
This climate debt trap means debt-to-GDP ratios exceed 60 per cent in many Pacific countries and routinely sit at or above 70 per cent in Latin America, compared to just 31.7 per cent in Australia.
The report calls for urgent reforms: grant-based climate finance instead of loans, debt cancellation, and recognition of the ecological debt owed by high-emitting nations to those most affected.
Details: Rising Tides, Rising Debt.
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Cyclones hit Pacific economies six times harder than Black Summer bushfires (Caritas Australia)
