Discurso do Representante Permanente Alterno, Embaixador Norberto Moretti, no evento paralelo de alto nível do Fórum Político de Alto Nível (HLPF) de 2024 intitulado "Ampliando as trocas de dívida e outros instrumentos inovadores de financiamento para o clima baseados em resultados, natureza e alimentação" - 16 de julho de 2024 (texto em inglês)

Statement by the Deputy Permanent Representative of Brazil to the United Nations, Ambassador Norberto Moretti, at the 2024 High-Level Political Forum (HLPF) high-level side-event "Scaling-up Debt Swaps and Other Innovative Outcome-based Financing Instruments for Climate,
Nature and Food"
July 16th, 2024

Thank you for the invitation to speak at this very timely side event on scaling up debt swaps.
These creative and innovative instruments can potentially help address the associated challenges of growing debt vulnerabilities, mitigating severe limitations in fiscal space and bridging the financing gap to achieve the SDGs.

The current debt crisis is leading to a development crisis as a growing number of countries are spending more on debt than investing in development goals. Further, the increase in inequality, hunger and poverty could result in the multiplication of social and political crises, especially in the poorest countries.

Under the Brazilian presidency, the G20 is holding discussions on reforming the international financial architecture, so as to align it with current development and environmental needs. Debt swaps are a part of those discussions.

From the debtor’s viewpoint, the potential benefits of swaps include debt relief; larger fiscal space; reallocation of debt to spending on development; increased private sector appetite for financing development; enhanced monitoring frameworks for policy effectiveness; and improved country ownership over projects.

From the creditor’s standpoint, the potential benefits may include: contributing to the achievement of the debtors’ SDGs; creating positive reputational effects related to UNFCCC or ODA targets; and unwinding creditor’s positions on distressed debt.

Despite these potential advantages, swaps pose challenges that need to be overcome.

First, they take time to structure and entail considerable human and transaction costs. Second, swaps may earmark public spending to specific projects. Third, effective implementation of swaps demands robust governance structures. Forth, swaps are generally small relative to a country’s overall debt, limiting their financing capacity. Finally, given transaction costs, creditors may prefer making grants over swaps operations.

To ensure that developing countries benefit from a wider deployment of debt swaps, they should be combined with other financial instruments and measures. Amon them: simplification of processes, reduction of transaction costs, and enhancement of governance structures.

The use of debt swaps can also benefit from the cooperation between governments and the MDBs. These institutions can provide guidance, capacity-building, and coordination among various stakeholders, including investment banks and NGOs, particularly in complex swap operations.

Last but not least, debt swaps should be based on a balanced approach to sustainable development in its three dimensions. They should not be used to over-emphasize climate and environment goals, for example, to the detriment of social and economic ones. This is why we welcome the notion of debt-for-development swaps, for more fiscal space to the attainment of all 2030 Agenda goals.

I hope these brief comments help our discussions today.

I thank you