Debt-for-climate swaps: analysis, design and implementation

Debt-for-climate swaps: analysis, design and implementation


Marcos de Chamón; Erik Klok; Vimal V Thakoor; Jerome Zettelmeyer

Publication date:

August 12, 2022

Electronic access:

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Disclaimer: IMF Working Papers describe ongoing research by the author(s) and are published to elicit comment and encourage debate. The opinions expressed in IMF Working Papers are those of the authors and do not necessarily represent the views of the IMF, its Board of Directors, or IMF management.


This paper compares debt-for-climate swaps, i.e. partial debt relief operations conditional on the debtor’s commitment to undertake climate-related investments, with other budget support instruments . Since some of the benefits of debt-climate swaps accrue to non-participating creditors, they are generally less effective forms of support than conditional grants and/or general debt restructuring (which could be linked to adaptation climate when the latter significantly reduces credit risk) . That said, debt-climate swaps could be superior to conditional grants when they can be structured to make de facto climate commitment superior to debt service; and they could be superior to full debt restructuring in narrow contexts, when the latter is expected to produce significant economic disruption and the debt-weather swap is expected to significantly reduce debt risks (and ensure debt sustainability). debt). In addition, debt-climate swaps could be useful in expanding fiscal space for climate investments when subsidies or more comprehensive debt relief are simply not on the table. The paper explores policy actions that would benefit both debt-climate swaps and other forms of climate finance, including the development of markets for debt instruments tied to climate performance.

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