Debt Swap for Green Recovery: Options, Challenges and the Way Forward for Pakistan (W-196)

Debt Swap for Green Recovery: Options, Challenges and the Way Forward for Pakistan (W-196)

Publication details

  • Wednesday | 28 Sep, 2022
  • Sajid Amin Javed, Hina Aslam, Muhammad Umar Ayaz
  • Working Papers
  • 112
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Muhammad Umar Ayaz, Sajid Amin Javed and Hina Aslam

Abstract:

This study proposes debt swaps for green recovery from COVID-19 in Pakistan. Debt swaps can provide a fiscal space tackl`ing the country’s existing environmental and debt crisis simultaneously. Possible options and challenges faced by Pakistan under these swaps are discussed. G-20 countries have shortlisted Pakistan for debt relief. Linking Pakistan’s financing needs to its NDCs while using green financing mechanisms can help benefit from these opportunities. For debt swaps, “ownership within the government” is a major challenge. Although there is a considerable support from the federal government, the ownership dissipates at provincial level. Most importantly, public sector has capacity issues in negotiating and implementing debt swaps, particularly at the provincial level. To benefit from debt swaps, Pakistan must develop a multisectoral approach to institutionalize the process with responsible stakeholder engagements bringing in a plan of action. Finally, Pakistan must adopt Natural Capital Accounting (NCA) into policy making and financing linking-up with debt swaps and nature bonds.