Debt-for-climate swaps in the COVID-19 era: Killing two birds with one stone?

Dennis Essers, Danny Cassimon & Martin Prowse
Analysis and Policy Brief 43

The COVID-19 pandemic has further fuelled problems of debt sustainability in developing countries and has sapped the fiscal resources needed to finance climate mitigation and adaptation efforts. We examine whether “debt-for-climate” swaps, instruments whereby debtor countries are relieved from their contractual debt obligations in return for local climate-related spending commitments, may be helpful in tackling worrying debt levels and climate concerns simultaneously.