African leaders at a meeting of finance ministers in the Ethiopian capital, Addis Ababa, are considering swapping debt to invest in climate action.
The 55th session of the Economic Commission for Africa was held between March 15 to March 20.
The “debt-for-climate swap” option is an economic tool that allows a country’s debt to be reduced in exchange for commitments on green investments. It was among several alternative green financing models discussed at t
he ongoing United Nations conference for finance and economic ministers that supporters say would boost funds to adapt to climate harms, protect nature and finance local communities.
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Egyptian finance minister Mohamed Maait said that his country is one of many that is now having to add heavy climate costs to budgets stretched thin by external debt — which takes up to 17% of countries’ spending in some cases — and other basic needs.
“What am asking every day and every hour is where do I get the money to protect our people from climate extremes,” Maait said, adding that borrowing was often the only option for some nations.
Yet “many countries simply cannot access international financial markets because of rising interest rates,” Hanan Morsy, the chief economist of the U.N. Economic Commission for Africa told the roundtable Monday evening. Morsy added that private sector investments in climate finance are lower in Africa than in any other part of the world.
Ministers also discussed bonds that would help increase private financial flows as well as “blended finance” models that would combine development funds and private capital as potential solutions for climate funding.
Interest in green finance has been growing, along with criticism that current mechanisms don’t work for countries ravaged by climate extremes but have contributed little to the planet-warming emissions in the atmosphere.
