Debt for climate swaps: innovative financial instruments for public debt management
IIED co-organised an event on debt for climate swaps as part of the 2022 Africa Climate Week on 31 August, featuring chief economist Paul Steele.
The world is facing a triple crisis of debt, climate change and biodiversity loss. The impacts of the COVID-19 pandemic on the economic system have increased volatility in developing country markets, particularly in Africa, where high levels of debt are increasing the levels of vulnerability in the region.
Several countries in Africa are now considering debt-for-climate swaps as an innovative solution to manage mounting public debts, climate change challenges – particularly underfunded adaptation action – and COVID-19 recovery.
Traditionally, these instruments represent an exchange of the existing debt contract with a new one, where the previous contract is normally discounted. The proceeds from the discount or foregone debt would then be used in an agreed manner to fund project to tackle climate change.
This side event, co-organised by UNEP, IIED, the Commonwealth Finance Hub and the government of eSwatini as part of Africa Climate Week (ACW 2022), brought together government representatives and experts to exchange in-country experiences to design effective debt-for-climate swaps, including the advantages of this innovative financing instrument for advancing action for climate adaptation.
ACW 2022 provides a platform for governments, cities, private sector leaders, financial institutions and civil society to address the climate change crisis in the context of regional priorities and the need for a green recovery from the pandemic. The week-long hybrid event brought together stakeholders to take the pulse of climate action in the region, explore climate challenges and opportunities, and showcase ambitious solutions.
- Helene Gichenje (welcome remarks), Commonwealth regional climate finance adviser for Africa
- Duduzile Nhlengethwa-Masina (panellist), director, Eswatini Meteorological Service, government of Eswatini
- Andrey Chicherin (panellist), head of innovation, technology transfer and co-funding platforms, Green Climate Fund
- Soeli Santos (panellist), treasury director, Ministry of Finance, government of Cabo Verde
- Marie-May Jeremie (panellist), chief executive officer, Seychelles' Conservation and Climate Adaptation Trust
- Vimal Thakoor (panellist), senior economist, International Monetary Fund
- Innocent Onah (panellist), chief natural resources officer, African Natural Resources Management & Investment Centre, African Development Bank (AfDB)
- Sumalee Khosla (Q&A moderator), global climate adaptation finance adviser, UNEP CCAU
- Paul Steele (closing remarks), chief economist, IIED
A recording of the event is available below or on IIED's YouTube channel.
The Climate Home website also covered the event, reporting that an International Monetary Fund paper argues in favour of swapping debt repayments for climate investments in debt-burdened nations.
Related reading: Gender concerns in debt relief | Innovative financing for Africa: harnessing debt for climate and nature | Whose debt is it anyway? A sustainable route out of the crisis for low-income countries | Tackling the triple crisis. Using debt swaps to address debt, climate and nature loss post-COVID-19