Public budgets in the developing countries of the region are pressed due to rising external debt and debt service, which risks expenditure on climate action and for achieving the SDGs. The adverse impact of COVID-19 has exacerbated the fiscal pressures further. Given this urgency, ESCWA has launched a Climate/SDGs Debt Swap Initiative toward supporting debt relief and improving climate finance in middle-income countries in the Arab region that are facing high and increasing debt burdens. A Debt Swap Mechanism (DSM) has been developed in 2020. A wide range of stakeholders, including high level representatives from member States, representative from Paris Club, reputed global experts, and development partners discussed ESCWA’s DSM in an Expert Group Meeting in December 2020.
The outcome of the meeting was very much fruitful, which highlighted the urgency and usefulness of the initiative by ESCWA. Following the meeting, a roadmap for operationalizing the Debt Swap Mechanism (DSM) is currently being prepared. It aims to provide win-win-win solutions for debtors, creditors and donors/development partners that can utilize debt servicing payments for achieving climate-sensitive national development objectives in line with implementation of SDGs and Paris Agreement.