Double-Edged Debt: Business RC Practice

Why do nations that are most vulnerable to climate disasters struggle to protect themselves despite knowing the risks? What happens when debt payments drain resources that could fund climate resilience? These easy-difficulty passages for GMAT and GRE unravel the complex relationship between global financial systems and climate adaptation efforts.

Read these medium difficulty RC passage(s) in Business, Economy, and Governance and answer the question(s) that follows. You can choose the GMAT style Reading Passage and the question or the GRE RC variant and answer the GRE-style question. Even better, you could solve both.

GMAT RC Practice | Easy | ~170 words

The financial constraints facing developing economies have created a debilitating paradox wherein nations that are most vulnerable to climate disasters allocate disproportionate resources toward debt service rather than environmental resilience. According to research from the Global Economic Justice Institute, lower-income countries annually spend approximately five times more on debt repayments than on addressing climate challenges. As a result, climate resilience infrastructure remains systematically underfunded in regions experiencing the most severe climate impacts despite contributing minimally to global carbon emissions.

This imbalance stems from decades of structural inequalities in global lending practices, where unfavorable loan conditions compound financial pressures on already strained economies. For instance, in Coastalia, an island nation, recurring tropical cyclones have intensified due to warming ocean temperatures, yet the government redirects potential disaster preparedness funds toward servicing loans from industrial nations. Consequently, a self-perpetuating debt-climate trap emerges: climate disasters damage economic assets, thereby reducing national income while simultaneously increasing borrowing needs. Although international financial institutions have recently proposed debt pauses for such countries, these initiatives remain inconsistent and inadequate.

Question Type: Inference | Question Difficulty: Medium

Which of the following can most reasonably be inferred about the relationship between debt and climate resilience in developing economies?

1. Financial institutions have refused to recognize the link between debt burdens and climate vulnerability.
2. High-emission countries deliberately structure debt to hinder climate adaptation in vulnerable nations.
3. Debt pause initiatives would solve climate challenges if applied consistently across affected nations.
4. Without reformed lending practices, vulnerable nations will remain caught in a debt-climate vulnerability cycle.
5. Coastalia could solve its climate challenges by diverting debt payments to disaster preparedness.

GRE Reading Practice | Easy | ~140 Words

When tropical storm Karina devastated Porto Verde last year, the small coastal nation’s recovery efforts were hobbled not by logistical constraints but by fiscal obligations. Despite urgent infrastructure needs, the government allocated merely 15% of emergency funds to rebuilding, because servicing foreign debt consumed the remainder. This scenario exemplifies the pernicious dichotomy facing numerous vulnerable states, where debt servitude trumps climate resilience. The supposedly impartial international financial architecture operates with an inherent bias, perpetuating a system where impoverished nations bear disproportionate climate burdens while simultaneously transferring wealth to creditor countries. The asymmetry is stark: lower-income nations collectively allocate quintuple resources to debt payments compared to climate adaptation, effectively subsidizing the carbon-intensive development that precipitated their precarious position.

Question Type: Main Idea | Question Difficulty: Medium

The main idea of the passage is that:

1. The current global financial system unfairly forces climate-vulnerable countries to prioritize debt repayment over environmental protection.
2. Foreign debt obligations prevent coastal nations from adequately responding to natural disasters.
3. Porto Verde represents a unique case where debt servicing has impeded recovery from tropical storm damage.
4. International creditors intentionally structure loans to exploit nations affected by climate disasters.
5. Climate adaptation funding is insufficient because lower-income nations mismanage their financial resources.