Climate change and external debt vulnerability : the case of Sub-Saharan Africa

This study examined the infuence of climate change vulnerability on the external debt vulnerability of Sub-Saharan Africa, with a focus on the Vulnerable Twenties (V20s), utilizing panel data spanning from 2015 to 2020. The climate readiness, climate vulnerability, and external debt vulnerability indices were derived via principal component analysis (PCA). The results from the system GMM analysis indicate that climate readiness exhibits a negative and signifcant impact across short- and long-term periods for the overall sample. However, for the V20s, the negative efect of climate readiness shifts to a positive and signifcant one over both short and long terms, with the longterm efect being more notable. These fndings highlight a vicious cycle between debt and climate crises within the V20s. Thus, prioritizing debt relief over climate fnance loans, decarbonizing greenhouse gas emissions, redirecting funds for climate goals, improving debt practices, and investing in public services would break nations' vicious cycle of debt and climate vulnerability.