Climate Finance: Challenges, Opportunities, And Way Forward For Pakistan
Author: Zahid Majeed

This study assesses Pakistan’s potential and options for climate finance. Climate change and associated emergent risk are threatening the very existence of modern civilization with all its magnanimous advances. Countries like Pakistan having higher vulnerability to changing climate are at most risk. Worryingly, these countries have lowest capacity to fight climate change. One of the biggest barrier is the lack of fiscal space to finance claimant action. So is the case for Pakistan, ranked as the 5th most vulnerable country to climate change in 2020 by GCRI (Abubakar, 2020). A deeper understanding of challenges and options for raising climate finance is of critical importance. The literature on climate finance for Pakistan is scant. To the best, it is limited to accounting total foreign flows of climate finance. The issues like climate sensitive fiscal planning and role of banking sector in expanding climate finance remain ignored. This study undertakes the assessment of landscape of climate finance and to identify the challenges in this regard. Finally, it ascertains some possible options that Pakistan can explore to enhance and expand climate finance. Particular focus will be on i) climate finance sensitive fiscal planning, ii) green banking and capital market as catalyst of private sector as major player in raising climate finance. Overall, this study explores policy options to generate climate finance at national and international level. The analysis, using desk review, exploratory analysis of secondary data and perception survey administered on 100 respondents, shows that: i) Annual required cost for climate actions especially for adaptation measures is between $7 – $14 billion in Pakistan1 ii) Owing to (chronic) lower fiscal space and competing development choices, Pakistan has very limited capacity to finance climate action from domestic resources iii) Despite a high reliance on external finance, Pakistan has not been able to attract any sizable external finance from multilateral banks, bilateral arrangements or multiple climate finance initiatives such as green environment fund, green environment facility fund and green climate fund Pakistan needs to work on multiple fronts to generate required climate finance. Role of private sector will be key in generating domestic finance. Debt swaps can be helpful to 1 vi a large extent. Tapping global green market as well as bilateral climate agreements could be the best options to raise external finance. Civil society pressure is the efficient way to enhance climate informed fiscal planning in Pakistan. The SBP has stronger role to play, and it has potential. In a situation analysis on Pakistan’s capacity to finance the climate action from domestic resources is limited. The reliance on external finance is high. But Pakistan has been unable to attract external finance. Domestically, private sector has critical role to play. Most efficient way to generate finance from international resources may include tapping global green energy market and from bilateral agreements. Supervisor:- Dr. Iftikhar Ahmad

Meta Data

Supervisor: Iftikhar Ahmad

Related Thesis​