debt-for-climate

Creditors’ motivations appear to be mixed. While reputational benefits and international commitments are primary drivers, more pragmatic interests, such asthe opportunity to redeem discounted loans above market rates, also play a role. Asignificant finding is that most respondents feel their countries lack agency in DNS operations. The survey also indicates skepticism about DNS’s effectiveness inreducing sovereign debt, although respondents acknowledge its potential foraddressing environmental challenges. Transparency emerges as a major concern. Respondents consistently describe DNS transactions as opaque or minimally transparent, with local communities rarely, if ever, involved in the process. While DNS is not widely endorsed as either a preferred debt restructuring tool or climate finance mechanism, respondents do recognize its limited but meaningful role, particularly in environmental initiatives.

In summary, as stakeholders gather and discuss at the COP28 summit in Dubai, it is important for them to bear in mind that while debt-for-climate or ecological debt for fiscal debt swaps offers a promising approach to addressing debt and climate challenges simultaneously, they need to be implemented with careful attention to transparency, accountability, and integrity. Otherwise, it could become just another pathway to facilitate IFFs in Africa, which have the potential to undermine the fiscal benefits that should ordinarily result from these swaps.