Debt-for-nature swaps, a game-changer for the Democratic Republic of Congo’s (DRC) climate action

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The Democratic Republic of Congo (DRC), a country rich in natural resources, is exploring launching a debt-for-nature swap to finance sustainable development projects while easing its public debt burden.

This comes against the backdrop of a groundbreaking technical study, themed, Public Debt Swap Mechanism to Finance Climate Action in the DRC which was discussed at a technical workshop organised by the United Nations Economic Commission for Africa (ECA) and the Ministry of Finance of the Democratic Republic of Congo.

The workshop brought together over 20 participants from the Ministry of Finance, the General Directorate of Public Debt, the Central Bank of Congo and representatives of technical and financial partners to explore how debt-for-nature swaps could fund climate action in the DRC.

The study, Public Debt Swap Mechanism to Finance Climate Action in the DRC, conducted with the support of the French Development Agency, examined the country’s debt portfolio and identified potential projects for a debt-for-nature swap program. These include forest conservation, agriculture, battery and electric vehicle projects.

“The DRC is positioning itself as a solution country in the face of climate change,” said Doudou Fwamba Likunde Li-Botayi, Minister of Finance of the DRC. “The Debt Swap represents an innovative opportunity to convert part of our debt into strategic investments in key sectors such as education, health, agriculture and infrastructure.”

Innovative Financing

Debt-for-nature swaps are financial mechanisms enabling countries to channel funds into conservation and climate resilience initiatives without accumulating additional debt. These financial instruments allow countries to raise capital for building resilience against climate change and supporting green growth without accumulating additional debt. By reducing its debt burden, the DRC could reinvest in conservation projects that align with its green development goals.

Jean-Marc Kilolo, Economist at the ECA Macroeconomic, Finance and Domestic Resource Mobilization Division emphasized the organisation’s role in deepening financial markets in Africa and exploring innovative finance options to support resource-based industrialization.

“ECA provides technical support to African countries to develop local currency bond markets and set up their stock exchanges”, Mr. Kilolo said, noting that  ECA has provided capacity building to countries willing to prepare for sovereign credit rating and establish a regulatory environment for rating activities.

The First ‘Debt-for-Industrialization’ Swap

To further assist African nations, the ECA is working on a Sustainable Sovereign Debt Hub to help countries refinance existing debt or issue new climate-aligned debt, using Key Performance Indicators.

The DRC also sees debt swaps as a vehicle for industrial transformation. Mr. Li-Botayi highlighted the country’s ambition to develop the value chain for batteries and electric vehicles (EVs), leveraging its rich reserves of cobalt, copper, and lithium.

The value addition of minerals meets the imperatives of a green transition through electric mobility, but also of structural change, offering quality jobs. The successful completion of this financial arrangement will be the first “debt-for-industrialization swap” of its kind through technical support from the ECA.

This vision builds on the March 2023 signing of a framework agreement between the DRC, Zambia, and partners like ECA and Afreximbank to establish Special Economic Zones focused on producing battery precursors for EVs.

Green Energy Leadership

Africa’s “green minerals” are crucial for renewable technologies, with a single EV battery requiring significant quantities of graphite, copper, cobalt, and other materials—many of which the DRC has in abundance.

The DRC, which supplies over 70% of the world’s cobalt and 10% of global copper alongside Zambia, is well positioned to drive the green energy transition. Producing battery precursors domestically would be more cost-effective, sustainable and competitive compared to production in countries like China and the United States, according to a Bloomberg study commissioned by the ECA and partners.

Distributed by APO Group on behalf of United Nations Economic Commission for Africa (ECA).

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