ABSTRACT
Debt for nature swaps generally involve significant fiscal costs. As for the benefits for the developing country and its government, they are potentially ambiguous. The projects financed by the swaps typically involve the protection of exotic flora and fauna in which a considerable part of the social returns is externalized to the rest of the world. This, coupled with high social rates of discount in crisis-ridden developing countries, could mean that the benefits accrued to the international community actually end up exceeding those perceived by the population at large in debtor country. Hence the need to reorient the international agenda for swaps so that the environmental projects financed by them have a more direct impact on local population, e.g., control of urban air pollution and sewerage and industrial contamination of rivers and seas. Meanwhile, in view of the great international externalities involved, the protection of exotic flora and fauna could be financed through straight donations that do not involve fiscal costs for the debtor country.
KEYWORDS:
Public debt; green finance