Climate/SDGs Debt Swap

Background

Fiscal stress from high and increasing debt is draining a large share of many countries’ revenues to cover debt servicing, instead of financing the Sustainable Development Goals and climate-resilient projects. While debt servicing is a major public spending burden for many Arab countries, limited fiscal space puts the region at risk of being unable to recover from the COVID-19 pandemic. Scaling up official development assistance or climate finance pledges in the immediate and near terms may pose a challenge for donor countries, especially given the adverse economic consequences of the pandemic and the constraints affecting bilateral cooperation. Climate/SDGs debt swaps provide a unique opportunity for creditors and donors to assist developing countries to recover better from the pandemic, and strengthen development cooperation to accelerate the achievement of the SDGs and the Paris Agreement.

The Financing for the Development in the Era of COVID-19 and Beyond Initiative set out various options for consideration by Heads of States and Governments, including the use of debt swaps to assist countries facing high debt burdens. Moreover, the 2015 Addis Ababa Action Agenda on Financing for Development encourages highly-indebted developing countries to use debt-to-nature swaps.

Our approach

ESCWA launched the Climate/SDGs Debt Swap Mechanism (Debt Swap/Donor Nexus Initiative to support member States 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 helps Governments design climate/SDGs debt swap programmes to ensure that national priorities are addressed while contributing to the achievement of global climate objectives. The programme establishes a key performance indicators framework for monitoring and evaluation to assess impact at the project and programme levels, as well as transformational impact on climate and the SDGs. The initiative provides a “win-win” opportunity to foster development cooperation between the debtor, creditor and donor towards achieving progress on climate action and the SDGs.

Our partners

The project is coordinated in partnership with ESCWA’s Arab Centre for Climate Change Policies. The initiative has been supported by the Open Society Foundations since 2023.

Our activities

ESCWA launched the Debt Swap/Donor Nexus Initiative in December 2020 at a high-level conference that brought together ministers, senior officials and technical experts from selected member States. It held in March 2021 the first advisory committee meeting on operationalizing the Climate/SDGs Debt Swap Mechanism and published the Climate/SDGs Debt Swap Mechanism report.

This initiative relates to other publications listed below: