This is a presentation on addressing debt, climate and nature in post-COVID-19 recovery across Africa by Sejal Patel, researcher in the Climate Change research group of the International Institute for Environment and Development (IIED).
It was given as part of an online webinar on 30 March 2021 that explored emerging research into sustainable and innovative post-pandemic debt management with outcomes for nature and climate.
This event was part of the IIED Debates series and was hosted by IIED in partnership with the International Development Research Centre (IDRC).
More details: https://www.iied.org/triple-win-managing-debt-climate-nature-pandemic-recovery
2. Paul Steele and Sejal Patel / @IIED
Using debt swaps to address debt, climate crisis and nature loss, post-COVID-19 2
Source: World Bank
International Debt
Statistics data, 2018
World Risk Index for
climate 2019
Source: Bündnis
Entwicklung Hilft 2019
GEF Benefits Index
for Biodiversity 2008
Source: World Bank 2020
IDA Resource
Allocation Index 2018
Source: World Bank 2020 Source: IIED (2020)
Urgency in relation to vulnerability to climate extremes, biodiversity significance,
degree of indebtedness and credit worthiness
Emerging urgency
External debt stocks as a
percentage of GNI 2018
3. Paul Steele and Sejal Patel / @IIED
2030
AdaptCost/EastAfrica based on FUND national model
0 – 1 % GDP loss
Key
1 – 2 % GDP loss
2 – 3 % GDP loss
3 – 5 % GDP loss
5 – 10 % GDP loss
> 10% GDP loss
IMPACTS OF
CLIMATE
CHANGE – AS
PRONOUNCED
AS COVID19
Most African countries
are projected to lose 2-
5% GDP to climate
change by 2030 in
conservative estimates.
4. Paul Steele and Sejal Patel / @IIED
An approach to coherently tackle the three global crises.
Debt management for climate and nature is where a
creditor agrees for the debt to be reduced either by:
• Change in terms or instrument
• Debt bought back on the secondary market at a cheaper
cost
• And some form of debt write-off
It also looks to ensure debt sustainability in new bond
issuances going forward.
and the money ‘saved’ from the debt management is used
to invest in climate and nature activities
Tackling the triple crisis: Using debt swaps to address debt, climate and nature loss
post-COVID-19
4
Debt management for climate and nature
5. Paul Steele and Sejal Patel / @IIED
Using debt swaps to address debt, climate crisis and nature loss, post-COVID-19 5
Large scale debt management for climate
and nature
• Built into international architecture, brings all
creditors to the table
• Shift to systemic programmes
• Inclusive, integrated into development objectives
• Uses budget support:
funds are managed through
debtor government’s own budget with fiduciary
standards
• Managed as performance-based payments based
on country commitments (e.g. NDCs and NBSAPs)
Budget support advantages
1. Allows for larger amount of
funds to be swapped
2. Increases debtor government
ownership
3. Shifts accountability to
national citizens
6. Paul Steele and Sejal Patel / @IIED
Using debt swaps to address debt, climate crisis and nature loss, post-COVID-19 6
Transactions as budget support managed as performance-based
payments based on agreed policy commitments
Purpose of KPIs
• Creditor to measure and monitor
policy commitments and climate
and nature outcomes and
processes
• Debtor to demonstrate policy
commitments and climate and
nature outcomes and processes,
and to be held accountable to
these commitments by national
stakeholders
Sources of Key Performance Indicators (KPIs):
• General policy commitments from National vision and
5 year plan and annual budget
• Climate policy commitments from Nationally
Determined Contributions (NDCs)
• Nature policy commitments from National
Biodiversity Strategies and Action Plans (NBSAPs)
• Marine policy commitments from fisheries strategy
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Existing examples:
IMF balance of payments and macro-economic support: paid in instalments linked to policy actions with periodic reviews
World Bank Development Policy based Lending (DPL)
European Union Budget Support
Norway payments for Reduced Emissions from Deforestation and Forest Degradation (REDD+)
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