Q&A: ‘Climate finance should not aggravate Pakistan’s debt burden’

In 2022, devastating floods swept Pakistan, killing over 1,700 people and impacting at least 33 million. Later that year, the country successfully lobbied for the creation of a Loss and Damage Fund at COP27 in Sharm El-Sheikh.

This year’s COP31 has been described by its presidency as the “Implementation COP”, referring to how it is expected to help translate promises made at previous COPs into measurable results. Shezra Mansab Kharal, Pakistan’s Minister of State for Climate Change and Environmental Coordination, is keen to emphasise this aspect of the conference. Her country, one of the world’s most climate-vulnerable nations, is yet to receive any money from the Loss and Damage Fund.

Ahead of the November conference, Kharal met with Dialogue Earth for an exclusive interview at her ministry office in Islamabad. Here, behind her sprawling mahogany table, the wall bears a portrait of Pakistan’s first governor-general, the barrister Muhammad Ali Jinnah, as well as the country’s flag. Over a cup of tea, she spoke about the difficulties Pakistan has faced in accessing such finance, how the country will approach obtaining funding at COP31, and the most pressing climate issues facing Pakistan today.

This interview has been edited for length and clarity.

Dialogue Earth: Pakistan was instrumental in the creation of the Loss and Damage Fund at COP27 in 2022. Four years later, will Pakistan expect to receive some of the funds after COP31?

Shezra Mansab Kharal: Today it is 2026, and the people who were supposed to benefit from the funds are still waiting. The reason [Pakistan was] championing the creation of that fund was because we needed much, much more than what we could [cover] ourselves.

Pakistan has a diverse terrain, from the cryosphere to the coasts. We’ve had floods, glacier lake outburst floods, cloudbursts and urban extreme climate events. Whatever Pakistan could do domestically to fight our climate-induced challenges, we did. Climate change has placed an enormous economic burden on the country, and resources that could have been used for health, education or other development projects have had to be diverted for countering climate-induced disasters.

This year’s COP has been called the “Implementation COP” or the “COP of the future”, meaning that whatever pledges and promises have been made in the previous COPs now need to be implemented. Developing countries want to see tangible results of all those pledges and promises.

They’ve [the Loss and Damage Fund] set up their office now, in Manila. They have asked countries to give their asks and project proposals, and Pakistan has given two, totalling USD 39.9 million. Their cap for each project is USD 20 million. Let us see what we eventually do or don’t get.

There is a huge difference between what we [Pakistan] asked for and what has been pledged. The [pledged] sums are paltry and insignificant.

We also want to distinguish between international pledges, actual contributions to the fund, approved project financing and disbursement to individual countries. These are four different things. The actual disbursement still hasn’t happened, but we’re hoping that at least one of our projects will be approved by December.

Other agencies have helped. We’ve had money given to us by the Green Climate Fund, the Global Environment Facility and the Adaptation Fund.

One of the concerns we often hear is around Pakistan’s project governance being potentially questionable, or money not being used well. Did that impact pledges?

I’m glad this came up. The general impression is that Pakistan received a lot of pledges, but because the country didn’t perform in a satisfactory manner, they [the pledgers] withheld it. It’s a misconception that because there was not enough transparency or openness, funds or grants we got were taken back.

We do recognise that transparency in governance is extremely important and we are very, very focused on that.

So what has been the reason for the delays in getting the funding?

One thing I would like to emphasise – and that Pakistan is going to emphasise during the upcoming COP – is that global finance and accessing international climate finance have become very difficult, prolonged and complex processes.

Developing countries have to go through complex and prolonged accreditation processes. Extensive technical documentation needs to be done, high project preparation costs must be [spent], and lengthy approval processes must be gone through. These barriers can and have been delaying finance, even where needs are urgent.

That is one thing that needs to change in this global finance architecture. It needs major rethinking and redevelopment.

What will Pakistan push for at COP31?

Developing countries are the lowest emitters; we still are far from where developed countries are. Yet we are at the top of the list of victims of climate-induced disasters. To expect developing countries to take on the burden that should be on the developed countries is unfair.

The UNFCCC [United Nations Framework Convention on Climate Change] recently said that the world is not going to be able to keep to 1.5C [a global temperature rise threshold agreed in the Paris Agreement]. The [implications] are disastrous, as we recently witnessed with the Nepal floods. The Himalayan-Karakoram range is across eight countries; today this happened in Nepal, tomorrow it can happen in Pakistan or any of the others. Climate-induced disasters are not going to stop at borders.

People stand outside houses damaged by severe floods in the Rajanpur district of Pakistan’s Punjab province in 2022 (Image: Imago / Stringer / Alamy)

Pakistan is trying to build relationships where we can work together regionally, in partnerships with friendly countries.

At the COP we are going to ask for climate justice. That’s going to be the thrust of the argument. Under the Paris Agreement, this is called “common but differentiated responsibilities and respective capabilities”. Though all the world has a common responsibility to ensure that we keep under the 1.5C agreed in the Paris Agreement, every country can only do what its capacity allows it to. The goal might be common, but the responsibility is different for the developed and the developing countries, as is the capacity.

This should be kept in mind when decisions are taken and negotiations are made. We need technology, and we need capacity building.

Does this mean Pakistan will seek global climate justice and grant-based lending rather than loans?

If we look at the overall ecosystem of global financing according to the Paris Agreement, grants and loans are ironically and unfairly still going back to the developed countries who have historically been the highest emitters of greenhouse gases. Pakistan has been one of the lowest emitters, contributing less than 1% of greenhouse gas emissions. Yet we’ve been amongst the most impacted countries.

Pakistan and other developing countries receive very little of the total given out. In Pakistan’s NDC 3.0 [Nationally Determined Contributions], we have calculated we need USD 565.7 billion in investment by 2035 to deal with the country’s climate vulnerability.

Despite the challenges Pakistan faces, we have always shown our commitment to global climate challenges as well as our goals. In our NDC 3.0, Pakistan projected reducing our greenhouse gas emissions by 50% by 2035, out of which 17% would be domestically managed and 33% would be conditional reductions [dependent] on international support, if the others keep their side of the bargain.

We firmly believe climate finance should not aggravate our debt burden that is already weighing so heavily upon us and other developing countries. Pakistan has the economic burden of recovery and reconstruction as well as [developing] early warning systems to try and make sure disasters are not repeated.

We also want to make a clear distinction between financing for commercially viable mitigation projects and financing for adaptation and loss and damage.

Investments in renewable energy and industrial efficiency can attract concessional loans and private capital. But flood protection and glacier monitoring, early warning systems, protecting vulnerable communities… all these are essential public services that fall under adaptation and resilience. Generally, these interventions do not generate those sorts of financial returns, so they will require grant-based and highly concessional financing.

We are going to say a firm ‘no’ to more loans and more debt collection.

‘Grant-based’ would mean it’s completely free, but wouldn’t ‘highly concessional’ funding mean it is a loan? Is Pakistan not completely ruling out loans?

With the kind of funding required in Pakistan, I think we will keep our minds open. Highly concessional loans are something we can perhaps consider, but our top priority will of course be grants.

We will also advocate for a mechanism to create a hold – or delay at least – on the debt a country pays regularly when it faces a climate-induced disaster.

I’m not implying that the loans should be written off. We will advocate for different sorts of innovative financial instruments, like debt swaps.

Pakistan firmly believes in multilateralism and in multilateral organisations, and [that] this is the only way forward.

As state minister for climate change and environmental coordination, what have been your most pressing challenges within Pakistan, and what are the projects that take up your time and thinking?

One of the major challenges faced by Pakistan is the growing gap between the resources that are required and what we have. We lack technical capacity and institutional management.

We face all sorts of challenges: smog, floods, glacial lake outburst floods, droughts, urban disasters, urban flooding, heat islands – we have it all.

People carry sacks of vegetables while wading through floodwaters in Lahore, Pakistan (Image: Imago / Sajjad / Alamy)

On smog and air pollution, we are prioritising cleaner transport, improved fuel industrial emission standards, air quality monitoring, agricultural residue management and pollution control, because air pollution is a major health and economic challenge, particularly in Punjab. The World Bank supported the Punjab Clean Air Program with USD 300 million in financing.

As far as glacial lake outburst floods are concerned, in Gilgit-Baltistan, we are strengthening glacier monitoring, hazard mapping, early warning systems and community preparedness.

Agriculture is an important priority, being one of the backbones of Pakistan’s economy and being highly vulnerable to climate-induced risks and disasters. For agriculture and food security, we are looking at more climate-resilient crop varieties, more efficient irrigation systems like drip irrigation, improved water management, heat- and drought-adaptive farming practices, and climate advisory services to be more efficient.

There’s rainfall variability. Temperatures are changing across the world. In Pakistan, we are also facing those changing weather patterns. We face both flooding and water stress. This affects our national food security.

The National Adaptation Plan of Pakistan incorporates all these challenges, as does the NDC 3.0. In these two documents, we have provided a framework for climate resilience to ensure it is inducted into the national and provincial development plan.

In an interview with Dialogue Earth, former Pakistani climate change minister Sherry Rehman said the climate crisis is cross-sectoral, and that building the capacity of disaster management authorities ‘is the only way to address it, not in policy and departmental silos’. Do you see the Pakistani government’s departments and ministries working in concert to improve the country’s climate resilience?

I think with the National Adaptation Plan, everybody would have to get on the same page and work together. We do have mechanisms for intergovernmental organisations to work together, inter-ministerial organisations, and inter-ministerial contact, as well as [coordination] with the provinces. But it [all] needs to be strengthened.

The ministry [of climate change and environmental coordination] and the energy ministry are working together to develop a roadmap for the just green transition of Pakistan’s energy resources. The planning ministry’s Uraan Pakistan [a five-year national economic transformation scheme] has a special green component. They are working closely with the climate change ministry on that.

We have climate tagging on the overall budget to ensure that any and every project that now goes into the Public Sector Development Programme [Pakistan’s policy instrument to finance state infrastructure and socioeconomic projects] has a green component to it. [Editor’s note: climate tagging is a tool for tracking and reporting climate-relatedness of projects.]

The State Bank [of Pakistan] has already worked to get the green taxonomy in place [which defines economic activities that can be considered environmentally sustainable].

Any work that is done on climate is very intersectional and we are working closely with the other ministries as well as the provinces.