CoAct Database

Debt swap

ESCWA launched the Climate/SDGs Debt Swap Mechanism (Debt Swap/Donor Nexus Initiative) to support member States (namely in the Arab Region) in their struggle with climate finance, high debt burdens, and fiscal pressures that have been exacerbated by the adverse impact of the pandemic.

The Initiative converts national debt-serving payments on foreign debt into domestic investment for implementing climate-resilient projects through collaborative arrangements between debtors, creditors and donors. For debtor countries, it provides relief from the payment of interest on external debt, while increasing sustainable public investment in climate-resilient projects that advance the SDGs and the Paris Agreement. For creditors, the amount of the debt swap allocated for climate-resilient projects increases the official development assistance disbursement/climate finance pledges that accelerate the implementation of the SDGs and the Paris Agreement, without adding extra burdens on their budgets.

The initiative helps Governments to design climate/SDGs debt swap programmes, which ensure addressing national priorities while contributing to achieving global climate objectives. The programme establishes a key performance indicators framework for monitoring and evaluation to assess impacts at the project level and programme level, with transformational impact on climate and the SDGs. The initiative provides a “win-win” opportunity to foster development cooperation between debtor, creditor and donor toward achieving progress on climate action and the SDGs.