Wed. Feb 28th, 2024

An unprecedent debt-for-climate swap pact sealed today at the COP28 summit in Dubai blazes a trail for scaling up green investments in developing countries.

Under the innovative €2.4 million agreement, Belgium will relieve debt owed by Mozambique on condition the savings fund specified projects addressing climate vulnerability and emissions reduction.

The deal spotlights growing appetite for sustainable debt instruments that increase fiscal space in highly climate-exposed lower income nations.

Announcing the arrangement in Dubai, Mozambique’s Deputy Minister of Economy and Finance, Carla Alexandra Orestes do Rosário framed the swap as “a collaborative measure to enable an inclusive transition to a low carbon economy globally.”

Jean Van Wetter of Enabel, Belgium’s development agency handling the initiative, said the funds would back initiatives complementing its cooperation program with Mozambique. A special focus will be building resilience amongst marginalized communities in rural and urban zones.

Specifically, Enabel will channel the debt relief savings toward technical assistance and capacity building for disaster risk agencies, alongside clean energy transition efforts at the community level.

The swap deal signals a rising momentum for sustainable debt that achieves development impact alongside climate mitigation and adaptation upside. The COP27 summit last year saw the launch of a formal “SuRe” standard for certifying instruments like sustainability-linked bonds.

The pioneering debt-for-climate transaction with Maputo will doubtless spur policymaker interest in replicating the model to stretch international aid budgets whilst rewarding climate leadership in the developing world.

By Joy

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