Report

Aligning debt relief for climate and nature with principles of effective development cooperation

This report from UK think tank IIED outlines a number of action points to improve the effectiveness of debt swaps.

In recent years, mounting external public debt has placed significant constraints on low-income country government budgets, particularly for those countries on the frontlines of combatting climate change and biodiversity loss.

Debt for climate and nature swaps (DfCNS) can provide sovereign debt relief to achieve climate and nature goals. However, debt swaps to date have had relatively limited impact, with parallel processes undermining development effectiveness. These critiques bear a striking resemblance to perceptions of many aid projects. The Principles of Effective Development Cooperation, which were developed to improve aid quality and impact, could in fact be usefully applied to DfCNS.

A robust commitment to development effectiveness principles by focusing on broader, longer-term goals and impacts within national socioeconomic development could help deliver better climate, nature and development outcomes from debt swaps.

Based on an analysis of DfCNS against the development effectiveness principles, this paper therefore outlines a number of action points for creditors and debtors, debtor countries, public sector actors and the G20 and other relevant international bodies to improve the effectiveness of such debt swaps.