Debt-for-climate swaps can help developing countries make a green recovery

(Climate Home News, 5 Nov 2020) At last month’s meetings of the International Monetary Fund (IMF), three topics dominated the conversation: the coronavirus pandemic, greening the recovery, and climate change.

For many developing countries, especially the poorest, the overwhelming barrier to addressing all three is their debt burden. In a speech just prior to the meetings, IMF managing director Kristalina Georgieva noted low income countries “entered this crisis with already high debt levels, and this burden has only become heavier”.

There is no simple solution to the problem of developing country debt. However, debt-for-climate-protection swaps, if implemented at scale, can provide significant debt relief and support climate action in many developing countries.

As Argentina’s environment secretary, one of us (Picolotti) implemented a successful debt-for-environment swap with the United States. The swap allowed certain debts owed by Argentina to be bought back in local currency and reinvested in environmental protection. The face value of debt addressed was $38,100,000 and the environmental swap was $3,100,000.

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Climate Home News, 5 Nov 2020: Debt-for-climate swaps can help developing countries make a green recovery