Unlocking access to climate finance for Pacific Island Countries

Pacific island countries (PICs) are globally among the most exposed and vulnerable to climate change and natural disasters and are also among the least equipped to adapt, putting their economic development and macroeconomic stability at risk. Climate adaptation efforts in the Pacific are critical, but costs are substantial. Debt levels for some are high and rising, exacerbated by the pandemic. Average investment needs for climate-proofing infrastructure are estimated at 3.3 percent of GDP annually for the Asia-Pacific region during the next decade, but average between 6½ and 9 percent of GDP annually for PICs (IMF 2021a). While climate change is primarily caused by emissions from large advanced and emerging market economies, the Pacific islands are among those most heavily impacted by the adverse effects of climate change.

This departmental paper provides an in-depth overview of access to climate finance for PICs, evaluating successes and challenges faced by countries and proposes a way forward to unlock access to climate funds. Chapter 1 takes stock of the climate finance landscape and examines the current track record of PIC access to climate finance.1 The paper then reviews the requirements to access major climate funds (CFs), with a focus on the largest, the Green Climate Fund (GCF), identifying the types of potential challenges PICs could face in accessing finance (Chapter 2). Chapter 3 draws on country specific experiences in accessing climate finance to identify actual challenges and successes based on discussions with relevant country authorities. Chapter 4 identifies the specific public financial management (PFM) requirements to accessing climate finance, particularly those of the GCF. Putting this together with an assessment of PFM capacity in the region, it identifies areas where capacity challenges could be particularly acute and where IMF PFM diagnostic tools, and capacity development, could play a supporting role. The paper then offers conclusions with some options to go forward.