Zimbabwe Creditors Mull Debt-for-Climate Swaps to Cure Arrears

(Bloomberg) -- Zimbabwe’s creditors may be willing to consider a debt-for-climate swap with the nation as part of a restructure of its $21 billion arrears.

Interactions with the nation’s different development partners indicate that it is “an option that they are willing to consider,” Raul Fernandez, the United Nations Development Program project manager for climate development framework told, delegates Monday at an economic summit hosted by the country’s Treasury in the resort city of Victoria Falls.

“They need to see also some action from the government, this commitment to structural reforms,” he said. “There is that willingness, they have this in their radar, this option.”

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Debt swaps, such as those for climate and nature, are innovative financial mechanisms where a portion of a developing country’s external liabilities are forgiven in exchange for commitments to invest in climate or marine conservation projects. Similar instruments have been rolled out in Barbados, Belize, Gabon and Ecuador, Fernandez said in an earlier presentation.

“It can lead to substantial debt reduction,” said Fernandez. “In some cases it can lead to an improvement of the payment conditions.” The southern African nation has a “window of opportunity” which it can seize as industrialized countries are mandated to provide climate finance.

Zimbabwe has been locked out of international capital markets since 1999 after it defaulted on its debts. Unable to meet its obligations, interest payments have ballooned. In 2022 it solicited the help of Akinwumi Adesina, the African Development Bank president, and Joaquim Chissano, the former Mozambique leader, to lead restructuring talks with creditors. The nation’s creditors include the Paris Club, World Bank, European Investment Bank and the AfDB.

Finance Minister Mthuli Ncube didn’t immediately respond to questions sent to his mobile phone outside of office hours.

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