Ever since taking office in September, President William Ruto of Kenya has been dedicated to reducing the country’s national debt. This effort aims to mitigate the risk of default and lessen the burden of monthly payments to creditors like China. Additionally, Kenya has been grappling with the consequences of higher temperatures and reduced rainfall, culminating in a devastating drought in the Horn of Africa earlier this year that scientists attribute to climate change.
Ruto’s argument, that debt repayments from developing countries should align with support for those most affected by climate change, has gained traction in international forums. Both the World Bank and the IMF are under pressure to allocate funds toward addressing these interconnected challenges.
During a meeting in Paris in June to discuss reforms to the global financial system, Ruto spoke to Moral Money reporter Kenza Bryan and climate correspondent Attracta Mooney. They discussed the likelihood of reaching an agreement on special drawing rights (SDRs) and pause clauses, which would temporarily halt loan repayments in the event of a disaster.
Ruto emphasized the need for a larger deal that allows Africa, the global south, and developing countries to access development resources urgently and at scale. He called for the reform of multilateral development banks, with a focus on emergency liquidity, debt relief, and climate change financing. Ruto suggested using funds to settle existing debts, allowing resources to be directed towards mitigation and renewable energy. He proposed suspending debt repayments for 10 years.
When asked about the $500 billion commitments from the international community, Ruto suggested using the money for debt cancellation or debt pauses over a 10-year period. The freed-up funds would primarily be used for development, with some allocation towards climate change mitigation. Ruto also advocated for the creation of a green bank to drive the transition away from fossil fuels.
Regarding climate change, Ruto expressed the need for a global mechanism separate from the current multilateral development bank system, which he believes is tied to national and shareholder interests. He called for a new financial mechanism that is not controlled by any specific country or shareholder. Ruto proposed generating revenue from existing tax and levy initiatives, such as the IMF’s carbon tax, to fund climate change efforts.
Ruto dismissed the idea of African countries being excluded from emissions taxes, stating that they are willing to pay their fair share. He stressed the importance of equal contributions from all countries and expressed concerns about paying excessively due to shareholder interests. Ruto’s intention is to ensure that African countries are represented as shareholders and have a say in decision-making processes.
Ruto also questioned the efficacy of loss and damage funding and suggested moving away from such discussions. He argued that it would be challenging to convince citizens to contribute taxes for a global problem. Instead, Ruto emphasized the need for unity in finding solutions to climate change and establishing an effective governance structure.
In conclusion, Ruto proposed the creation of a global green bank similar to the World Bank but dedicated specifically to addressing climate change issues.
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