A new report by the UK-based International Institute for Environment and Development (IIED) suggests that debt-for-nature swaps could yield $100 billion for fighting climate change. These swaps involve forgiving the debts of poorer countries in exchange for their commitment to conserving critical ecosystems.
Potential Beneficiaries Identified
The report highlights countries at risk of debt crises, including Belize, Ecuador, Barbados, Gabon, and Cabo Verde, which have already undertaken such swaps.
Director of IIED’s Market
Laura Kelly, director of IIED’s sustainable markets research group, emphasizes that many debt-distressed nations, often most threatened by climate change, are considering these swaps.
Imbalance in Climate Finance
Despite collectively owing $431 billion, primarily to wealthier nations, financial institutions, and the IMF, these countries received less than $14 billion in climate finance in 2021. This stark disparity underscores the urgent need for increased financing to address climate challenges.
Push for More Debt Swaps
IIED’s report aims to spur action on debt swaps at the upcoming IMF and World Bank spring meetings. Kelly emphasizes the potential benefits for countries like Pakistan, Sri Lanka, and The Gambia, facing significant risks from climate change, such as sea-level rise and the need for flood prevention.
Ghana and Other Candidates
Ghana, currently restructuring its debt, is also cited as a potential candidate for debt swaps. Protection of its rainforests, vital for cocoa bean exports, could be enhanced through such initiatives.
Global Impact and Fiscal Relief
Kelly highlights that debt swaps not only provide fiscal space for governments but also contribute to global climate and nature conservation efforts. Many countries are interested in exploring these mechanisms.
Finance Minister in Washington for Talks
Meanwhile, Finance Minister Muhammad Aurangzeb has arrived in Washington to represent Pakistan at the spring meetings of the IMF and World Bank. Discussions are underway for a new bailout package following the expiration of Pakistan’s nine-month $3 billion stand-by arrangement.
Next Steps
A staff-level agreement has been reached for the release of the final tranche of $1.1 billion, pending formal approval by the IMF Executive Board later this week. This financial support is crucial for Pakistan’s ongoing economic recovery efforts.
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