Zimbabwe Considers Debt-for-Climate Swaps Amid Financial Crisis

Zimbabwe’s creditors are exploring a debt-for-climate swap as part of efforts to restructure the nation’s $21 billion arrears. Raul Fernandez, the United Nations Development Program project manager for climate development, noted that discussions with various development partners indicate “an option that they are willing to consider.” He highlighted the need for “action from the government” and a commitment to structural reforms to move forward.

Debt-for-climate swaps allow developing countries to reduce their external debts in exchange for commitments to invest in climate or marine conservation projects. Fernandez noted that such arrangements “can lead to substantial debt reduction” and may improve payment conditions for Zimbabwe, which has a “window of opportunity” to secure climate finance. 

 

 

A recent example is Belize, which signed a debt-for-nature swap with The Nature Conservancy in November 2021. This agreement reduced Belize’s external debt by 10 percent of its GDP and significantly improved prospects for marine protection. 

Zimbabwe has been locked out of international capital markets since 1999 due to a debt default, resulting in escalating interest payments. In 2022, the nation sought assistance from Akinwumi Adesina, president of the African Development Bank, and Joaquim Chissano, the former leader of Mozambique, to initiate restructuring talks with creditors, including the Paris Club and World Bank. Finance Minister Mthuli Ncube did not respond to enquiries outside of office hours.