African Ministers discuss innovative financing mechanisms to respond to climate change

Ministers of Finance, Agriculture and Governors of Central Banks from African countries have called for further innovative financing mechanisms to deal with the impact of climate change, which has led to economic losses from cycles, conflict, insecurity and cross-border political instability in the Sahel region.

African Development Bank President Akinwumi Adesina attended the discussions by the Bank’s Board of Governors, emphasizing the Bank’s involvement in strengthening the technical cooperation between the Bank and the African Risk Capacity (ARC) to respond to climate change in Africa.

The Bank is considering providing financial support to African countries to pay for annual insurance premiums to the ARC, an African Union (AU) initiative to shield farmers and communities from the impact of drought, floods and cyclones, which ruin livelihoods and leave communities vulnerable.

The Gambia, Malawi, Niger, Senegal and Mali are some of the countries that have received insurance payments to enable farmers affected by crop failure to replenish food stocks and to respond to drought.

The Bank’s Board of Governors, including Ministers Of Finance, who attended the “High-Level Panel on Sustainable Climate and Disaster Risk Financing Discussions,” called for a review of the systems used to determine the amounts payable to countries after undergoing climate-induced disasters.

The Governors also urged the Bank to consider financing more African countries to make annual insurance premium subscriptions in order to lower the overall premiums payable per country.

Some 32 African countries confronted by the impact of climate change have signed to the ARC agreement, but only a handful are making annual premium subscriptions, which the ARC requires to meet its obligations and to grow into a sustainable financial facility for responding to climate change.

“This is something new across the globe,” said Dolika Banda, the ARC Managing Director. “The ARC is an African solution to an African problem. The concept of the private sector involvement is also a key proposal for consideration in order to guarantee its sustainability.

Governors and the private sector attending the session called for the expansion of the climate facility to cover private commercial farmers from the impact of climate change.

Speaking during the same event, Malagasy Finance and Budget Minister Andriambololona Vonintsalama said her country planned to join the climate facility to guard against the adverse impacts of climate change. She said her country recently lost US $400 million, the equivalent of 4 percent of GDP, as a result of cyclones, which have affected close to 600,000 people in Madagascar, on the east coast of Africa.

“This is an institution which would give us solutions to what affects us every year,” Vonintsalama said.

Governors of the Bank pointed to a common resolve and readiness to meaningfully galvanise efforts and resources required to improve capability to better plan, prepare and respond to extreme weather events and natural disasters and to sustainably enhance food security for the vulnerable populations.

A critical component of the Bank’s High 5 agenda, “Feed Africa” is hinged on the promise to unlock the full potential of agriculture and improve the lives of at least 70% of Africans dependent on farming.

A greater percentage of agricultural activities in Africa is presently rain-fed and therefore susceptible to the vagaries of climate change and natural disasters which pose obstacles to achieving food security.

ARC use financial tools to help countries reduce losses and damage caused by extreme weather events and natural disasters in a timely, cost-effective, objective and transparent manner.

ARC provides sovereign disaster risk insurance to respond to natural disasters. In Africa, Malawi has received US $8.5 million to respond to drought while Senegal received US $16 million for disaster response. The ARC also paid Niger US $3.5 million.

Momadou Mbye Jabang, Project Coordinator at the Gambian Agriculture Ministry’s Central Projects Coordinating Unit, said floods led to burst river banks and flooding, affecting food production during the dry seasons for crops that do not require too much water and complicating food security.

Related news:
Climate and disaster risk financing get fresh boost from African Development Bank.

Source: https://am.afdb.org/en/news/african-ministers-discuss-innovative-financing-mechanisms-respond-climate-change

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