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(Re)orienting Sovereign Debt to Support Nature and the SDGs: Instruments and their Application in Asia-Pacific Developing Economies

Many Asia-Pacific low- and middle-income countries face the dual challenges of sovereign debt distress and climate and biodiversity breakdowns, while lagging on the SDGs. The report proposes means to manage sovereign debt and environmental distress, including how debt-for-nature swaps have been successfully deployed in debt-reorganization packages. The report presents rationales and possible roadmaps for a selection of Asia-Pacific economies - Lao PDR, Pakistan, and Pacific Small Island Developing States - sharing lessons from the Maldives and Fiji. We also focus on the role China could play, adding to the knowledge about this comparatively less-understood emerging creditor. While the scale of such swaps has risen significantly in recent years, their contribution to debt reduction remains modest. However, successful and relatively large-scale debt-for-nature swaps in Belize and Ecuador have given sovereign debtors a new impetus to explore them.