Pakistan is working with lender countries on a debt-for-nature swap program. Such an arrangement will help Pakistan with its debt relief in return for binding commitments to achieve conservation targets, Bloomberg reported on Monday.
The Adviser on Climate Change to the Prime Minister, Malik Amin Aslam, said, “Four to five creditors will commit to an intent to engage for a debt-for-nature swap”. He said that an official letter of intent in this regard can be expected to be announced on World Environment Day (5 June).
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He added that Pakistan is also hosting the World Environment Day this year, but did not give further details on the creditors. However, he said that the negotiations regarding the details were ongoing.
According to an International Monetary Fund (IMF) report released last month, Pakistan owes the highest outstanding amount of bilateral debt to China, with Japan following second, and trailed by the United Arab Emirates (UAE), France, and Germany.
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The practice of debt swaps is not new, even in terms of achieving climate goals. The United Nations (UN) put a value of over $2.6 billion for debt-for-climate and nature agreements, with some deals dating to as early as 1985. The practice has gained momentum and has become increasingly popular after the coronavirus pandemic.
There is a worldwide effort to realign finance with the joint targets of protecting the natural world and reducing nations’ debt strains.
This is not the first major endeavor that Pakistan has undertaken for the environment this year. Pakistan has also announced plans to issue its first green bond worth $500 million. The bonds are expected to be rolled out within a few weeks.
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