USD331bn climate financing needed by 2030: SBP

KARACHI: As climate risks continue to intensify, Pakistan will require an estimated USD331 billion in climate financing during 2024-2030 to strengthen resilience and prevent massive economic losses caused by climate change. Pakistan is the 15th most affected country from climatic events between 1995 and 2024. According to the State Bank of Pakistan (SBP) the climate financing requirement, as per Climate Policy Initiative (CPI), is equivalent to around 10 percent of the country’s cumulative GDP or USD 47 billion per year over the 2024-2030 period, highlighting the scale of investment needed to protect livelihoods, infrastructure and economic growth from increasingly frequent climate-related disasters. CPI is an analysis and reputed advisory organisation on climate finance. It also estimates global climate finance needs of USD 8. 6 trillion per annum to limit global warming to 1. 5 °C. READ MORE: Climate finance: TIP urges govts to be mindful of integrity risks associated with carbon markets According a recently report issued by the SBP, as per Government of Pakistan (GoP) estimates, the country needed climate finance range from USD 200-348 billion for climate resilient development by 2030 and Nationally Determined Contribution (NDC) implementation. Moreover, the GoP’s latest Pakistan Climate Prosperity Plan for multi-phased investment `and technology access, focusing on the convergence of development, climate and nature, has identified an investment need of USD 1. 6 trillion by 2050. The report said that the financing needs reflect the country’s high climate vulnerability and very little only 1 percent contribution to global greenhouse gases (GHG) emissions, while the top ten emission of GHG emitting economies together contribute about 70 percent of total global GHG emissions. However, global climate finance flows to Pakistan are far below the country’s financing needs. Climate disasters have already inflicted economic losses amounting to USD 58. 8 billion to Pakistan economy by 2025. A loss of USD 29. 3 billion was occurred on Pakistan’s economy during 1992-2021, whereas the 2022 floods alone caused damages of around USD 28 billion and 2025 flood USD 1. 5 billion. SBP estimates also show that in terms of direct impact, floods had significant and negative effect on GDP, albeit it was partially compensated owing to post-diluvial improvements in agricultural output and post-disaster rehabilitation and recovery. Nevertheless, the floods also had an indirect (negative) impact on GDP through increases in input prices. On average, Pakistan received only USD1. 4 to USD2 billion in climate finance annually over the past decade, with inflows peaking at around USD 4 billion in 2021. Despite this increase, the funding remains far below the level required to meet the country’s conditional climate commitments and address its growing climate financing needs. Moreover, global climate finance flows to Pakistan also remain significantly lower in per-capita terms, compared to that received by peer economies, including Bangladesh, the Philippines, Kenya and India. There are three main and somewhat interrelated reasons behind these financing gaps. Explaining the climate financing challenges, SBP mentioned that global climate finance mitigation projects are considered more bankable than adaptation projects, whereas Pakistan’s financing needs for mitigation are lower than global average. Secondly, the bankability of climate projects in the country is affected by recurring episodes of macroeconomic instability, exchange rate volatility, elevated sovereign risks and political uncertainty, amid underdeveloped financial markets and weak institutional and regulatory environment, it added. “Bankability hinges on a variety of factors including sovereign risk; credit risk; exchange rate risk; and political risk, and macroeconomic stability”, the report said. SBP pointed that Pakistan’s climate finance gap also stems from a limited capacity to develop project pipeline. Developing project pipelines is important to attract international public and private sector inflows since it gives a sense of direction and confidence to Multilateral Development Banks (MDBs) and market participants, and increases their commitments. The country’s weak project pipelines are due to a variety of factors, as there is a need for evidence-based quantification of the cost of climate inaction to create buy-in for global grants and concessional financing, it added. MDBs also report that Pakistan’s disbursement rates for climate finance are hindered by bureaucratic bottlenecks and shifting political priorities. Quoting an example, the report said that World Bank’s Pakistan Hydromet and Climate Services Project concluded in mid-2025 with critical components scrapped. According to the World Bank’s completion report, weather radars, automatic weather stations and observatories were dropped due to procurement delays and institutional frictions. In addition, lack of technical data anchors, such as integrated MRV (Monitoring, Reporting, and Verification) system, makes it difficult for donors to track outcomes, leading to risk aversion among international lenders. It may be mentioned here that as per World Bank, Pakistan’s GDP is projected to fall by 4. 5-6. 5 percent by 2050 due to climate change in the optimistic scenario, and by as much as 7-9 percent in the pessimistic scenario, where agriculture and industry are the most exposed sectors. Copyright Business Recorder, 2026

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