Pakistan has concluded a pact with international lenders which links debt relief to biodiversity objectives. Back in October 2020, The Finance for Biodiversity Initiative (F4B) could help to solve the mounting crisis in sovereign debt in developing countries while safeguarding fragile ecosystems and biodiversity. Pakistan is one of the developing states with its skyrocketing sovereign debts in the South Asian region. Subsequently, Pakistan announced its ‘Ever Green Bond’ in March 2021. Since then Pakistan is working to attract investors in this field. Particularly to deal with its climate change issue in parallel with ‘sovereign debt’ issues.
The South Asian nation, Pakistan, has developed a debt-for-nature swap arrangement with the lending countries. This would see debt remission in exchange for enforceable pledges to meet conservation goals. This year Pakistan will host World Environment Day. Which will take place on the 5th of June, an official letter of intent may also be announced on the same day.
This year #Pakistan is hosting the World Environment Day 2021 and Ministry of Climate Change is preparing for that. It will be a honour for Pakistan to execute the event on National and International Level.#WorldEnvironmentDay #10billiontreetsunami pic.twitter.com/FPnDuDdkMX
— 10 Billion Tree Tsunami (@Plant4Pak) May 22, 2021
Malik Amin Aslam, Pakistan’s climate change adviser to Pakistan’s Prime Minister Imran Khan, said in an interview; four or five creditors will commit to a debt-to-nature exchange. Although, The list of these four or five countries is not final.
Apart from Germany, Japan and the UAE, are not amongst Pakistan\’s most prominent bilateral creditors. This is according to the International Monetary Fund report, published last month.
Pakistan and its History of Debt Swaps
Intriguingly, debt swaps have been around for decades. Resultantly, the value of debt-for-climate agreements and natural arrangements at the United Nations has risen to more than $2.6 billion from 1985 to 2015, most of which was during the 1990s.
As part of a bigger drive to rebalance the financing of the natural world while decreasing the financial burden of nations after the pandemic of the COVID-19, the drive has been made to re-populate it.
Pakistan’s Nature-Performance Bond
Pakistan claimed earlier this year that the country is establishing a so-called nature-performance Bond, a new tool that will link reimbursement costs to measurable biodiversity goals. This is part of a variety of loan kinds that have lately been formed to take advantage of; rising investor interest in environmental, social and governance assets.
This year, a UK government review led by Partha Dasgupta pushed the concept of conservation bonds to advocate the revision of economic measurements such that the cost of harmful nature-based ecosystems was taken into account.
The south Asian region as a whole is in peril due to climate change. The Germanwatch report has declared Pakistan as the 5th most vulnerable country to climate change. On the other hand, Pakistan has to also meet up with its pressing change of sovereign debt. Combine, both climate change and sovereign debt plights can be well addressed through these programs. If such programs start to yield lucrative results, other countries in South Asia would also toe the lines of the Finance for Biodiversity Initiative. Without any misgiving, both climate change and sovereign debt issues are uphill challenges for South Asia in general and for Pakistan in particular.
