Supporting a sustainable recovery

This report by the Climate Policy Initiative examines the impact of the COVID-19 pandemic on sovereign debt in low- and medium-income countries and proposes the use of Debt for Climate (DFC) swaps to create fiscal headroom for green recovery and climate action.

• The COVID-19 pandemic has increased debt vulnerabilities for low- and medium-income sovereigns, with the IMF estimating that public debt service costs relative to government tax revenue will surpass 20% for most low-income and emerging countries in 2021.
• There is a significant gap in debt relief interventions; while Low Income Countries (LICs) have access to support, no such interventions exist for Middle Income Countries (MICs), despite the fact that Upper MICs owe more than 70% of non-developed world debt service due in 2021.
• Debt for Climate (DFC) swaps allow a debtor nation to redirect external debt payments in foreign currency toward local currency payments that finance domestic climate projects, thereby reducing indebtedness and freeing up resources for green investments.
• DFC swaps are intended to achieve three primary outcomes: enhancing climate spending for friendly activities, boosting economic recovery by stimulating private investment and protecting biodiversity, and reducing external sovereign debt to free up cash flows for productive investments.
• The report suggests using redirected flows from swaps for specific mitigation and adaptation goals, including the acceleration of coal power retirement, the adoption of energy efficiency, and the implementation of nature-based solutions.

APA

Climate Policy Initiative (2021). Supporting a sustainable recovery. https://www.climatepolicyinitiative.org/publication/debt-for-climate-swaps/

Chicago

Climate Policy Initiative. Supporting a sustainable recovery. 2021. https://www.climatepolicyinitiative.org/publication/debt-for-climate-swaps/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Supporting a sustainable recovery |date=10 May 2021 |url=https://www.climatepolicyinitiative.org/publication/debt-for-climate-swaps/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2021supporting, author = {{Climate Policy Initiative}}, title = {{Supporting a sustainable recovery}}, institution = {Climate Policy Initiative}, year = {2021}, month = may, url = {https://www.climatepolicyinitiative.org/publication/debt-for-climate-swaps/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }