Kenya considers debt-for-nature swap as $2 billion debt deadline looms

The debt swap will eable it redirect funds towards essential social services.
Kenya is faced with a maturing debt of $2 billion in June.
Belize, Ecuador, and Gabon have previously undertaken comparable debt swaps.

This approach will enable it to redirect funds towards essential social services, as revealed by sources familiar with the deliberations, Bloomberg reported.

Faced with a maturing debt of $2 billion in June, the nation is collaborating with banks and a select group of potential investors to examine the framework for this debt swap.

Debt-for-nature swaps are financial transactions in which a portion of a developing nation's foreign debt is forgiven in exchange for local investments in environmental conservation measures.

Belize, Ecuador, and Gabon have previously undertaken comparable debt swaps, refinancing existing debts in exchange for pledges to safeguard their marine environment.

Barbados is following suit with its second similar agreement, intending to allocate proceeds for enhancing a sewage treatment plant to reduce emissions and enhance water quality.

However, should the Kenya deal be concluded, it would signify a departure from the typical debt-for-nature swaps like the above.

In Kenya’s case, the funds will be earmarked for social projects, with a focus on areas such as healthcare, as reported by sources.

President William Ruto has consistently championed sustainability initiatives to resonate with the public. He has previously expressed interest in both debt-for-nature swaps and the issuance of green bonds as part of these efforts.

In a move to tackle climate change, Kenya's cabinet recently endorsed the Sovereign Green Bond Framework on Monday, aiming to secure alternative funding for green and resilient investments amidst increasing climate-related expenses.