1.
www.iied.org @IIED
Using debt swaps to address
debt, climate and nature loss
post-COVID-19
Tackling the
triple crisis
Paul Steele and Sejal Patel
September 2020, paul.steele@iied.org

2.
Paul Steele and Sejal Patel / @IIED
Tackling the triple crisis: Using debt swaps to address debt, climate and nature loss
post-COVID-19
2
Debt crisis: rising private and public debt in
developing countries worsened by COVID-19

3.
Paul Steele and Sejal Patel / @IIED
Tackling the triple crisis: Using debt swaps to address debt, climate and nature loss
post-COVID-19
3
Climate crises and nature crisis
Vivian and Colins Angeso at home in flood-prone Oyola, surrounded by rising
waters, Nyanza Province, Kenya, © Robin Wyatt
Timber cut for firewood and charcoal within the forest reserve. Photo by Mike
Goldwater, Mozambique 2010 © Mike Goldwater

4.
Paul Steele and Sejal Patel / @IIED
Debt for climate and nature programme
swaps are where a creditor allows the debt
to be reduced either by:
• conversion to local currency and/or
• paid at a lower interest rate or
• some form of debt write-off
and the money saved is used to invest in
poverty-reducing and growth enhancing:
• climate resilience
• climate emissions mitigation or
• biodiversity protection
Tackling the triple crisis: Using debt swaps to address debt, climate and nature loss
post-COVID-19
4
What are debt for climate and nature
programme swaps?

5.
Paul Steele and Sejal Patel / @IIED
Tackling the triple crisis: Using debt swaps to address debt, climate and nature loss
post-COVID-19
5
How to get large scale debt for climate
and nature swaps?
So far debt swaps have been focused on smaller projects with
money managed in trust funds by international NGOs.
We propose that these swaps shift from projects to programmes
through the use of budget support where funds are paid into a
debtor government’s own budget
• Budget support allows for larger amount of funds to be
swapped
• Budget support increases debtor government ownership
• Budget support shifts accountability to national citizens
SIDS and LDCs are already proposing similar approaches:
• Caribbean SIDS climate and nature swaps proposal and
• LDC Initiative for Effective Adaptation & Resilience (LIFE-AR)

6.
Paul Steele and Sejal Patel / @IIED
Tackling the triple crisis: Using debt swaps to address debt, climate and nature loss
post-COVID-19
6
Countries ranked by:
- debt distress
- climate vulnerability, biodiversity
richness and
- credit worthiness
Priority countries for climate and nature
programme swaps:
Priority Countries
1st priority
Cabo Verde
Viet Nam
2nd Priority
Honduras
Kenya
Nicaragua
Papua New Guinea
3rd priority
Cambodia
Kyrgyz Republic
Madagascar
Mozambique
Senegal
Sri Lanka
Uganda
Vanuatu

7.
Paul Steele and Sejal Patel / @IIED
Tackling the triple crisis: Using debt swaps to address debt, climate and nature loss
post-COVID-19
7
Benefits of climate and nature programme
debt swaps
• Ministries of Finance & Central Banks in
debtor countries: economic growth and
ownership of debt swaps
• Climate negotiators: new climate finance that
dwarfs Green Climate Fund
• China: as host of UN Biodiversity Convention,
finance for biodiversity
• Private creditors: increased debt sustainability,
climate commitments, possible climate emission
credits
• Paris Club: finance for climate
• UK: as host of UN Climate Convention, new
source of climate finance

8.
Paul Steele and Sejal Patel / @IIEDTackling the triple crisis: Using debt swaps to address debt, climate and nature loss post-COVID-19 8
Forward-look: international initiative on
climate and debt programme swaps
We call on the international community to
work with debtor countries to:
• Establish a technical working group,
under guidance of an international body
such as the World Bank
• To develop a comprehensive and
coordinated climate and nature
programme swaps initiative over the
next three years to address the triple
crises of debt, climate and biodiversity
loss
LDC coordination meeting at COP21 © Matt Wright/IIED