Supporting a sustainable recovery

The report argues that the COVID-19 pandemic has exacerbated debt vulnerabilities in low- and medium-income countries, potentially hindering climate action. It advocates for Debt for Climate (DFC) swaps, where external debt payments are redirected toward domestic climate projects in local currency, to reduce indebtedness and stimulate green investment.

• 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 exceed 20% in most low-income and emerging countries in 2021.
• There is a gap in debt relief interventions; while support exists for Low Income Countries (LICs), no such interventions are available 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 debtor nations to replace external foreign currency debt payments with local currency payments used to 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, boosting economic recovery through private investment and biodiversity protection, and reducing external sovereign debt to free up cash flows.
• The document suggests that redirected flows from swaps can be used for specific mitigation and adaptation goals, including the acceleration of coal power retirement, increased adoption of energy efficiency, and 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} }