In order to enter a rapidly expanding sector of the sustainable debt market, the African Development Bank Group is currently in talks to support a new debt-for-nature exchange.
“We’re looking at one transaction [and] still discussing the parameters,” said Hassatou Diop N’Sele, vice president for finance and chief financial officer at the AfDB, in an interview. She chose not to name the nation that had proposed the agreement, under which it would restructure its debt in return for dedicating part of the savings to environmental initiatives.
African countries have “a very good case” for using the financial arrangements, said N’Sele. “The continent faces multiple challenges, rising debt costs, a massive need for climate finance, and issues with regard to land degradation and biodiversity loss. With debt-for-nature swaps, there is the start of a solution,” she disclosed. ‘
In 2021, Belize completed the first debt exchange in the modern era with protection provided by the US International Development Finance Corporation. The Nature Conservancy, a charity, and the Inter-American Development Bank, the first multilateral to take on such a role, provided repayment guarantees for a Barbados contract. Since then, the IDB has supported the third and biggest deal in history in Ecuador.
