WASHINGTON--Green debt swaps have the potential to spur accelerated action on climate change in developing countries, the head of the International Monetary Fund said on Thursday, pledging to present an option for such instruments by November.
IMF Managing Director Kristalina Georgieva said it made sense to address the dual climate and debt crises at the same time, and IMF members on Thursday had strongly backed the Fund taking a bigger role on the issue of climate risk.
"When we are faced with this dual crisis - the debt pressures on countries and the climate crisis, to which many low-income countries are highly, highly vulnerable - it makes sense to seek this unity of purpose," Georgieva said.
"In other words, green debt swaps have the potential to contribute to climate finance. They have the potential to facilitate accelerated action in developing countries," she told reporters after a meeting of the IMF's steering committee.
The World Bank and the IMF are planning to launch a platform to advise poor countries on funding climate and conservation activities, amid a broader push that could link such spending to debt relief, Reuters reported on Wednesday, citing a draft document. The two institutions also said they are developing an "organizing framework" for connecting debt relief to countries' plans for investing in green, resilient and inclusive development, or GRID, in a paper published this week.
Georgieva confirmed that the Fund would work with the World Bank, noting that the COVID-19 pandemic had exacerbated budget constraints and debt challenges that hamper the ability of some countries to transition to clean energy, protect wildlife or make infrastructural changes to prepare for climate impacts.
"We are going to work with the World Bank and by (United Nations Climate Change Conference 26) COP26, we will advance that option," she said, adding that it would be up to creditors and debtors to decide whether to participate. COP26 is scheduled to take place Nov. 1-12.
She said many countries were interested in getting help to tackle both climate-related risks and better prepare their economies and agricultural sectors for climate shocks.
"This is a big priority," she said. "Because countries recognize that there is a big transition happening, they don't want to be left out of it."
