CAIRO - 17 April 2024: Egypt's Minister of International Cooperation, Rania Al-Mashat, called upon the international community to scale up debt swap programs for climate action. The minister emphasized the importance of reducing financial burdens while advancing sustainable development goals in a high-level event with the Economic and Social Commission for Western Asia (ESCWA), on the sidelines of the International Monetary Fund (IMF) Spring Meetings.
Al-Mashat drew attention to the pressing needs of developing countries, particularly in Africa, where there is a substantial shortfall in climate financing. The continent requires an estimated $200 to $400 billion annually until 2030 to address climate-related challenges. Meanwhile, African countries paid approximately $69 billion in debt service payments in 2023 alone, servicing their outstanding sovereign debts.
The event, titled "Debt Swap for Climate Action," focused on exploring the debt swap mechanism as a means to support climate-related initiatives and facilitate the implementation of the Sustainable Development Goals (SDGs). Al-Mashat highlighted the potential of debt swaps to enhance countries' fiscal capacity, enabling them to expand investments in climate action.
During her speech, Minister Al-Mashat commended ESCWA's initiative on debt swaps for climate action, which fosters cooperation between debtor and creditor nations. She emphasized that such collaboration could accelerate the implementation of the SDGs, aid in economic recovery, and strengthen development cooperation, ultimately enabling countries to fulfill the objectives of the Paris Climate Agreement.
The minister acknowledged that, despite growing international interest in debt swaps for climate action and development, the scale of such programs globally remains relatively low. She underscored the need for greater ambition and participation from developing and emerging countries.
During the session, Al-Mashat shared Egypt's successful experience with debt swaps, highlighting the country's innovative approach to international cooperation and development financing. Over the past two decades, Egypt has implemented two debt swap programs amounting to approximately $720 million with Italy and Germany.
These debt swaps have facilitated the implementation of 120 development projects across various sectors aligned with Egypt's national goals. The program with Italy amounted to $350 million and aimed to support sustainable development efforts in Egypt. Additionally, during the G8 summit in Deauville in 2011, the government of the Federal Republic of Germany agreed to a debt swap worth €240 million. This initiative focused on projects promoting job creation, private sector competitiveness, and energy development in Egypt.
Egypt's debt swap experience stands out due to its comprehensive approach and clear governance rules, ensuring maximum benefit from these programs. The country has implemented priority projects in diverse sectors, including food security, education, green transformation, women's empowerment, child protection, and waste management.
Minister Al-Mashat also revealed that Egypt is currently implementing a debt swap tranche with Germany under the "NWFE" program, in line with the joint political declaration between Egypt, Germany, and the United States. This tranche, valued at €54 million, supports the energy pillar of the program and aims to facilitate the transition to renewable energy sources. Furthermore, Egypt has signed the first-ever debt swap program with China and China's first such agreement with another country.
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