Sabine Mauderer: Unlocking potential - green finance in the Middle East, North Africa and Central Asia

Keynote speech by Dr Sabine Mauderer, Member of the Executive Board of the Deutsche Bundesbank, at the Governor's Luncheon, organised by the International Monetary Fund's Middle East and Central Asia Department, Washington DC, 17 April 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

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1 Climate change – not a distant threat

Good afternoon everyone.

I am delighted to kick off your discussions on how to make financial sectors more resilient to climate-related risks and how to scale up climate finance. They come at the right time. 

Countries in the Middle East, North Africa and Central Asia are particularly vulnerable to the impact of climate change. Not tomorrow but today. We are in the midst of a climate emergency.

For example, the devastating floods that hit Pakistan in 2022 affected 33 million people and drove up food inflation. The Asian Development Bank estimated the costs for rehabilitation of land and reconstruction of infrastructure to be at least US$16.3 billion.

Elsewhere in the region, water scarcity is a big problem, for instance in Egypt. Only about 3% of the country's surface is arable land, i.e. land on which crops can be grown, mostly along the Nile. Heat waves, water stress and salinated soil already put pressure on Egypt's agriculture. Climate change will further exacerbate these existing vulnerabilities with implications for food prices and food security. 

Climate change will have significant effects on food prices all over the world according to a recent study by the European Central Bank (ECB) and the Potsdam Institute for Climate Impact Research (PIK). Globally, food inflation could increase by 3.2 percentage points per year by 2035. Headline inflation could rise by 1.18 percentage points annually. 

The study underlines the greater vulnerability of many countries in the Middle East, North Africa and Central Asia where the effects might exceed the global averages. The study also suggests that, as temperatures continue to rise, these inflationary effects are likely to worsen.