Climate Financing: Debt-To-Nature And Debt-For-Climate Swaps

Abstract

Sub-Saharan Africa has a significant debt profile, owed mostly to international lenders, including sovereign States, multi-lateral agencies and multi-nationals. For instance, with a projected external debt of $88.7 billion in 2025 , African countries are currently experiencing the highest levels of debt in over a decade. This has culminated in Sub Saharan African governments reportedly allocating approximately 40-50% of their domestic revenue to debt servicing. These debt obligations affect the development of key infrastructure, ultimately affecting the economic outlook of these countries.

Coupled with these debt obligations, Sub-Saharan Africa is mostly impacted by changes in climate. It is estimated that Africa needs $2.8 trillion between 2020 -2030 (circa $277 billion annually) to implement its Nationally Determined Contributions (NDCs) under the Paris Agreement . However, the debt profile makes it almost impossible for Sub-Saharan Africa to address