As Nigeria’s foreign debt reaches $43.2 billion in the second quarter of June 2023, the International Monetary Fund (IMF) is exploring the possibility of implementing a debt-to-climate swap deal to assist indebted nations in reducing their debt while contributing to ecosystem protection.
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Kristalina Georgieva, the Managing Director of the IMF, revealed this during an interview at COP28, highlighting the challenges faced by heavily indebted countries in pursuing decarbonization efforts.
“Decarbonization is very difficult for countries with high levels of debt. Climate is one problem, and debt is another problem for the same countries. We are very interested in debt-for-climate swaps,” stated Georgieva on the sidelines of COP28.
While emphasizing that a clear mechanism for the debt-for-climate swap deal is yet to be established, Georgieva outlined the IMF’s goal of defining key performance indicators. This would enable countries to project their climate actions and, in return, receive debt relief to fund these initiatives.
“We are not there yet, but we are thinking about it,” she added, noting that the number of countries in debt stress is relatively small, but the number close to debt distress is significant, with levels projected to increase by one percent in the coming years.
African countries, including Nigeria, are advocating for debt relief and could potentially benefit from this initiative by projecting their climate actions to access additional climate funding once the deal is finalized.
