VIC FALLS— Zimbabwe’s creditors may be open to considering a debt-for-climate swap as part of efforts to restructure the nation’s $21 billion in arrears, according to Raul Fernandez, a project manager with the United Nations Development Program (UNDP).
Speaking at a summit hosted by Zimbabwe’s Treasury in Victoria Falls, Fernandez noted that interactions with Zimbabwe’s development partners indicated a willingness to explore the innovative financial mechanism.
“There is that willingness; they have this on their radar,” Fernandez said, emphasizing that creditors expect the government to demonstrate a commitment to structural reforms.
Debt-for-climate swaps allow a portion of a country’s external debt to be forgiven in exchange for commitments to fund environmental projects, such as climate action or marine conservation. Similar instruments have been implemented in other countries, including Barbados, Belize, Gabon, and Ecuador.
In an interview, Fernandez explained that Zimbabwe’s unique situation, particularly its inability to access concessional loans, makes a debt-for-climate swap a viable option.
“The basic idea stems from Zimbabwe’s inability to access concessional loans,” he said, adding that creditors may need to consider writing off some of the country’s debt for this strategy to be effective.
Fernandez highlighted that this option would likely be more suitable for bilateral creditors and could be part of a broader policy discussion during an upcoming environment ministry conference in the capital. He stressed that while the swap is part of Zimbabwe’s Climate Investment Plan, it is not intended to replace ongoing debt restructuring talks but rather to complement them.
Zimbabwe has struggled to access international capital markets since defaulting on its debts in 1999. The resulting interest payments have significantly increased the country’s debt burden. In 2022, Zimbabwe enlisted the help of African Development Bank President Akinwumi Adesina and former Mozambican President Joaquim Chissano to lead restructuring talks with creditors, including the Paris Club, the World Bank, and the European Investment Bank.
Zimbabwe’s Finance Minister Mthuli Ncube has not yet commented on the potential debt-for-climate swap or the ongoing negotiations.
Source: Bloomberg