IMF, World Bank to exchange debt relief for green projects

Gulf Today Report 

The idea of “green” investments was welcomed during the spring meetings of the IMF and World Bank, this week.

Green investment is the act of forgiving debt held by low-income countries in exchange for an environmentally sustainable project. 

The Covid-19 pandemic has doubled the crisis of poor countries as lots of livelihoods that generates income for these countries were lost. 

The countries are left struggling to pay off debts while confronting environmental problems. 

That makes them "highly, highly vulnerable," Kristalina Georgieva, managing director of the International Monetary Fund, said this week, adding that it thus "makes sense" for the world to pursue so-called "green debt swaps." 

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Creative options

IMF, World Bank in collaboration with United Nations and the OECD have launched a technical working group that would provide creative ways for countries to handle these simultaneous challenges, said a World Bank spokeswoman. 

While there is no timeline yet for announcing concrete measures, all parties involved are clearly pointing toward the COP26 climate summit to be held in November in the Scottish city of Glasgow. 

For Thierry Deau, the founder and CEO of the Paris-based Meridiam group, which specializes in developing and financing infrastructure projects, if the green debt-swap option is pursued, it will have to be linked to clear "conditionalities" to ensure that debt relief, in fact, leads to the launching of green projects.

Job opportunities

Georgieva calls on authorities to take vulnerability to climate shocks into account before allocating financial aid. 

She also stressed that countries launching "green" projects can see the added benefit of heightened employment. 

"There are opportunities for job creation," she said. "Just take, for example, renewable energy -- seven jobs to one in the traditional coal energy sector," even if some training is required.