Under the terms of a new agreement, Portugal will redirect debt payments owed by Cape Verde to a fund that will help the island nation tackle climate change.
Cape Verde, a former Portuguese colony, owes 140 million euros to the Portuguese state. Initially, Portugal will put 12 million euros in debt payments scheduled until 2025 into the fund, though eventually “the entire amount of debt repayments” will go toward the fund, Portuguese Prime Minister Antonio Costa said during a state visit to Cape Verde.
“This is a new seed that we sow in our future cooperation,” Costa said. “Climate change is a challenge that takes place on a global scale, and no country will be sustainable if all countries are not sustainable.”
Such debt-for-climate swaps help poorer countries cope with rising debt and growing threats from climate change. Debt-for-climate swaps are also another route by which wealthy countries can fulfill their obligation to provide $100 billion annually in climate finance to the developing world. Based on its size and historic emissions, Portugal’s fair share of the $100 billion goal is close to $700 million, according to the Overseas Development Institute, but it mobilized just one-tenth of that amount in 2020.
“This agreement should serve as inspiration for other creditors and debtor nations to harness sovereign debt as part of the solution to the challenges of climate change and biodiversity loss,” Tom Mitchell, head of the International Institute for Environment and Development, which helped facilitate the agreement, told Climate Home News. “Linking borrowing to protection of the ocean, nature, and tourism could ultimately save the lives and livelihoods of people who are already suffering the effects of a warming planet, having done the least to cause it.”