SHARM EL-SHEIKH - Belgium on Monday became only the third nation in the world to pledge funding to help developing countries cope with unavoidable damage and losses caused by climate change, offering 2.5 million euros in support for Mozambique.

While relatively small, the funds have an outsized significance, announced as more than 100 world leaders gather in Sharm el-Sheikh, Egypt, for the U.N. COP27 climate summit - where the urgent need for funding to support developing countries facing climate change-fuelled disasters will dominate the talks.

Minister for Development Cooperation Frank Vandenbroucke said Belgium would allocate 2.5 million euros ($2.5 million) to climate change "loss and damage" out of a new 25-million-euro package of support for Mozambique from 2023 to 2028, which would also support projects like installing solar panels in regions not connected to the power grid.

"We are going to intervene on the ground to help the inhabitants to better protect their communities and their environment against natural disasters such as cyclones and floods, which are increasingly violent due to climate change," Vandenbroucke said in a statement.

Previously only Scotland and Denmark had pledged funding for climate-linked loss and damage, as well as the Belgian region of Wallonia.

Major polluters including the United States and European Union have blocked poorer countries' past attempts to secure such funding, fearing liabilities for their historic contribution to the greenhouse gas emissions fuelling climate change.

Ahead of the COP27 summit, dozens of developing countries have united in demanding that countries agree to a funding facility where rich nations would provide loss and damage cash to vulnerable states.

Mozambique is one of the poorest countries in the world and among the most vulnerable to climate change, facing extreme weather including cyclones, droughts and catastrophic floods which in recent years have ravaged crops, polluted water supplies and forced people to flee homes.

Cyclone Idai, which struck the southern African country in 2019, caused about $1.4 billion in damage and $1.39 billion in losses, according to an International Labour Organization assessment.

The Belgian government statement did not specify whether the money would focus on avoiding losses by preparing for more extreme weather events or if it would compensate communities for losses after a climate-related disaster.

(Reporting by Kate Abnett, Virginia Furness; Editing by Janet Lawrence)