Zambia receives ‘debt-for-nature’ proposal

LONDON. — Zambia received a ‘debt-for-nature swap’ proposal as part of its US$13 billion restructuring discussions, a move that while complex to secure and not part of current talks, could set an eco-friendly precedent for other debt crises if eventually included.

Zambia has become a test case for the G20-led ‘Common Framework’ restructuring vehicle launched during the Covid-19 pandemic, but differences with some of its main creditors about the debt relief required means progress has been slow.

The government confirmed to Reuters on Wednesday a previously undisclosed detail — that the World Wildlife Fund (WWF) provided a blueprint last year on how conservation pledges could be part of the deal.

In their simplest form, debt-for-nature swaps replace expensive bonds or loans with cheaper financing, usually with the help of a credit guarantee from a multilateral development bank.

It is an approach that helped both Belize and Seychelles secure write-downs that put tens of millions of dollars into ocean protection and conservationists see Zambia, known for the iconic Victoria Falls, as an obvious candidate.

Its vast swathes of national parks are home or migration routes for some of Africa’s most impressive wildlife including lions and elephants. Their habitats, though, are under increasing threat from climate change and deforestation.

“The Ministry of Finance and National Planning has received a proposal from the World Wildlife Fund regarding the consideration of debt-for-nature swaps,” the ministry said in an emailed response to whether it was looking at a swap.

The idea has not been factored into the International Monetary Fund’s current debt sustainability analysis but that wouldn’t prevent it being added later, especially if creditors made it clear that they might back it.

“We will be considering all debt restructuring options that are in the framework (G20 Common Framework)which falls within the DSA (debt sustainability analysis) parameters . . . and that are acceptable to all parties,” the ministry’s response added.