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Without Adaptation, Middle East and Central Asia Face Crippling Climate Losses

By Jihad Azour and Christoph Duenwald

International cooperation is essential to manage the costs and maximize the benefits of adaptation, particularly for the most vulnerable countries.

Climate change is inflicting crippling losses in the Middle East and Central Asia, with poor and conflict-affected countries suffering the most from higher temperatures and extreme weather events.

In any given year since 2000, climate disasters have killed more than 2,600 people, affected 7 million others, and caused $2 billion in direct material damage.

A new IMF staff paper assesses the economic impact of climate change in the region and shows how adaptation policies have become a pressing priority. It underscores the need for international support to finance adaptation.

According to our analysis, climate disasters in the region reduce annual economic growth by 1-2 percentage points on a per capita basis. And these events are expected to become more common and more severe as the planet heats up.

Over the past three decades, temperatures in the region have risen by 1.5 degrees Celsius—twice the global increase of 0.7 degrees Celsius. This has been particularly harmful for countries that are already hot.

A temperature increase of 1 degree Celsius in five of the hottest countries (Bahrain, Djibouti, Mauritania, Qatar, and the United Arab Emirates) results in an immediate decline in per capita economic growth of around 2 percentage points.

In addition, much of the region lies in harsh climate zones, where global warming is exacerbating desertification, water stress, and rising seas. Rainfall has become more variable and climate disasters such as droughts and floods more frequent. Lives and livelihoods are at risk.

In Tunisia, for instance, 90 percent of tourism is located along coasts that are threatened by erosion and vulnerable to further rises in the sea levels. And in Iran, a severe drought last year sparked protests as water shortages forced farmers out of work.

Climate change has high human, economic costs

Countries with low climate resilience, including fragile and conflict-affected states such as Afghanistan, Somalia, and Sudan, as well as Pakistan, a lower-middle income country, captured by both exposure and vulnerability to climate hazards, have suffered intensely with more people killed or affected.

Many people in these countries live off rain-fed subsistence farming, which is especially vulnerable to climate shocks. The challenge is compounded by political and macroeconomic instability, low socioeconomic and financial development, and risks to food and social security.

Countries with stronger institutions and climate-resilient infrastructure, for example heat-resistant buildings or efficient irrigation systems, have generally experienced lower human losses. The same is true for those with higher levels of socioeconomic and human development, such as the Gulf Cooperation Council countries.

Despite global efforts to curb carbon emissions, further intensification of climate stresses seems inevitable. By 2050, average summertime temperatures could exceed 30 degrees Celsius in half the region’s countries.

Seasons are also likely to become drier in the Middle East and North Africa, and rainfall patchier in the Caucasus, Central Asia, and Pakistan, making droughts more likely. In Tajikistan, the annual probability of climate-induced droughts could rise tenfold from 3 percent today to more than 30 percent by the end of this century.

Pressing priority

Most countries now recognize that climate adaptation is a pressing priority and have started to address climate challenges. Priority should be given to measures that are highly beneficial under all plausible climate-change scenarios (so-called “high-value, no-regret measures”) and building capacity to adapt to future climate challenges.

Tunisia, for instance, has expanded its capacity to produce freshwater from desalination. Pakistan has strengthened its social safety net by scaling up targeted cash transfers. And Tajikistan and Uzbekistan have upgraded cross-border early warning systems for natural disasters.

There is no single one-size-fits-all solution because each country faces its own set of challenges, but some common principles apply to the whole region.

As the IMF’s Managing Director Kristalina Georgieva stressed recently at the World Government Summit in Dubai, adaptation policies should be brought into the mainstream of all national economic strategies. Macroeconomic frameworks that reflect climate risks should be developed to determine the right policy responses.

In addition, specific interventions could focus on boosting public investment in resilient infrastructure, encouraging a greater role for the private sector in adaptation, and adjusting inclusive growth and development agendas to reflect climate risks, for example by supporting businesses that are suffering from climate change and strengthening social protection for vulnerable households.

Simulations for Morocco show that investment in water infrastructure would improve resilience to droughts, reducing GDP losses by almost 60 percent and capping the rise in public debt.

For lower-income, fragile and conflict-affected countries, which have suffered heavy losses historically, the immediate priority should be strengthening disaster preparedness, while improving the capacity of institutions to address climate change and the ability of communities to respond to shocks.

Stepping up adaptation efforts will require significant additional spending and, therefore, financing.

International support

Tapping additional domestic revenue can play an important part in supporting spending on climate adaptation while reducing any increase in public debt. But countries also require greater international support to finance adaptation, ideally on concessional terms, as well as transfers of expertise and technology to develop their own capacity to adapt to climate change.

Between 2009 and 2019, bilateral and multilateral organizations provided around $70 billion in climate finance to the region, according to our calculations, based on data from the Organisation for Economic Co-operation and Development. However, a large proportion was for mitigation initiatives and only around a quarter solely for adaptation. Estimated adaptation needs are much greater.

The COP27 summit in Egypt later this year offers an opportunity for the international community to scale up its climate finance contributions and support adaptation in developing economies.

Strengthening capacity to adapt to climate change is critical for the Middle East and Central Asia and should be pursued in tandem with global mitigation and transition efforts. For countries that adapt in time, there are opportunities to create jobs that are sustainable and support economic recovery and resilience after the pandemic.

The IMF is supporting its member countries in these efforts with policy advice, capacity development, and lending. A proposed Resilience and Sustainability Trust will further support reforms that increase countries’ resilience to climate change.