By Andrea Shalal
WASHINGTON, Apr 8 (Reuters) – Green debt swaps have the potential to stimulate accelerated action against climate change in developing countries, the managing director of the International Monetary Fund (IMF) said on Thursday, which pledged to unveil an option of this type of instrument for November.
Kristalina Georgieva said it made sense to tackle the dual climate and debt crises at the same time, and that IMF members had strongly supported on Thursday that the Fund take a bigger role on the issue of climate risk.
“When faced with this double crisis – the debt pressures on countries and the climate crisis, to which many low-income countries are very, very vulnerable – it makes sense to seek this unity of purpose,” Georgieva said.
“In other words, green debt swaps have the potential to contribute to climate finance. They have the potential to facilitate accelerated action in developing countries,” he told reporters after an IMF steering committee meeting.
The World Bank and IMF are planning to launch a platform to advise poor countries on financing climate and conservation activities, which could link that spending to debt relief, Reuters reported Wednesday, citing a draft of the document.
The two institutions also said they are developing an “organizational framework” to connect debt relief with countries’ plans to invest in resilient and inclusive green development, or GRID, in a document released this week.
Georgieva confirmed that the Fund will work with the World Bank, noting that the COVID-19 pandemic has exacerbated budget constraints and debt problems that hamper the ability of some countries to transition to clean energy, protect wildlife or make infrastructure changes to prepare for climate impacts.
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“We are going to work with the World Bank and for the COP26 (United Nations Conference on Climate Change) we will advance in that option,” he said, adding that it would be up to the creditors and debtors to decide whether to participate. COP26 will be held from November 1 to 12.
Georgieva said many countries were interested in getting help to cope with climate-related risks and better prepare their economies and agricultural sectors for climate shocks.
“This is a high priority,” he said. “As the countries recognize that a great transition is taking place, they do not want to be left out of it.”
(Report by Andrea Shalal; Edited in Spanish by Javier López de Lérida)