The International Monetary Fund (IMF) anticipates that climate financing needs in the Middle East and Central Asia region will soar to $3 trillion by 2030.
Jihad Azour, the Director of the Middle East and Central Asia region at the IMF, revealed that previous estimates pegged the region’s climate financing requirements at $1 trillion to address climate change mitigation and adaptation projects, reports Al-Qabas daily.
However, the latest IMF report, titled “Preparing the Financial Sectors in the Middle East and Central Asia for a Green Future,” has tripled this figure to $3 trillion. Azour emphasized the importance of banks in managing risks associated with climate change and supporting government policies in this regard.
According to the report, anticipated credit losses due to climate change could reach $50 billion, potentially impacting banking systems in 30 countries across the two regions by 2050 if current trends persist. Additionally, the banking sector may face capital losses of $140 billion due to exposure to carbon emissions effects, equivalent to 2.5% to 5% of the GDP of both regions. Failure to address climate issues could create pressure on the balance sheets of commercial banks in the Middle East and Central Asia, particularly as recent years have witnessed challenging climate phenomena.
Azour stressed the importance of banks in understanding and mitigating environmental and climate change risks, emphasizing the need for policy-making and strengthening the role of the insurance sector. Failure to address these risks could potentially impact banks’ profitability by up to 5%.
While green financing in the Middle East and Africa is gradually increasing, particularly in Gulf countries, it remains insufficient compared to the region’s financing needs.
In its recent economic update, the IMF revised its GDP growth forecast for the Middle East and North Africa region to 2.9% this year, attributing this to short-term oil production cuts. The Fund recommended gradual energy subsidy cancellations in the region, which could result in annual savings exceeding $336 billion.
