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Climate Change and Public Debt

In the context of a world increasingly concerned with the negative effects of climate change, many countries have adopted new economic and financial measures designed to help them prevent, mitigate and adapt to climate change. Many countries have included provisions to manage government institutions’ expenses for the prevention and reduction of natural disasters.

In addition, to address and reduce the public debt burden, there has also been a surge of initiatives such as debt buybacks, debt reductions and debt-for-nature swaps, in which a portion of a nation’s foreign debt is repurchased, reduced or forgiven in exchange for local investments in environmental conservation measures.

Many countries have already experienced the benefits of such financial transactions. Nonetheless adoption of these measures is not without challenges: countries need to prepare budget, financial and accounting systems to allow adequate quantification of resources; resources for mitigation, adaptation and vulnerability reduction are a significant pressure on government debt; generation and attraction of international resources is vital to the continuity of programs on climate change; and, programs or projects that are born under the debt must become self-sustaining.

In order to address these and other challenges that occur, LAC Debt has created a network for countries interested in sharing their experiences and learning how to access and manage financial mechanisms for prevention, mitigation and adapting to climate change.

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