IDEAS home Printed from
   My bibliography  Save this paper

The pitfalls and potential of debt-for-nature swaps: a US-Indonesian case study


  • Cassimon, Danny
  • Prowse, Martin
  • Essers, Dennis


The vital role of forests in limiting the likelihood of dangerous climate change has precipitated renewed interest in debt-for-nature swaps. This article uses evidence on past debt-for-nature swaps and similar debt mechanisms to assess the recent second wave of debt swaps. It outlines five typical shortcomings of this form of financial transaction: that they often fail to deliver additional resources to the debtor country; often fail to deliver more resources for conservation/climate purposes; often have a negligible effect on overall debt burdens, and, as such, do not generate more ‘indirect’ benefits; and are often in conflict with the new aid delivery paradigm’s emphasis on alignment with government policy and systems. Our analysis is applied to a recent debt-for-nature swap initiative between the United States and Indonesia. We show that this case, which we consider as a litmus test for current swap practice, performs unevenly across the five shortcomings identified. On the one hand, the swap does not create additional resources for the Government of Indonesia, is too insignificant to create indirect (positive) economic effects, and appears at odds with the new aid delivery paradigm’s insistence on system alignment. On the other hand, the swap does not reduce Government of Indonesia resources, and is very much in line with current national policy. The extent to which the resources provided by the swap are additional to other donor support and reserved domestic budget lines for conservation goals is unclear. Whilst a second generation of debt-for-nature swaps should clearly be avoided, there is a need to debate broader ways of linking debt service repayments to forest conservation.

Suggested Citation

  • Cassimon, Danny & Prowse, Martin & Essers, Dennis, 2009. "The pitfalls and potential of debt-for-nature swaps: a US-Indonesian case study," IOB Working Papers 2009.07, Universiteit Antwerpen, Institute of Development Policy (IOB).
  • Handle: RePEc:iob:wpaper:2009007

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Marion Davin & Mouez Fodha & Thomas Seegmuller, 2019. "Pollution in a globalized world: Are debt transfers among countries a solution?," Working Papers halshs-02303265, HAL.
    2. Mouez Fodha & Thomas Seegmuller, 2014. "Environmental Quality, Public Debt and Economic Development," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(4), pages 487-504, April.
    3. Mr. Marcos d Chamon & Erik Klok & Mr. Vimal V Thakoor & Mr. Jeromin Zettelmeyer, 2022. "Debt-for-Climate Swaps: Analysis, Design, and Implementation," IMF Working Papers 2022/162, International Monetary Fund.
    4. Mohamed Boly & Jean-Louis Combes & Pascale Combes Motel & Maxime Menuet & Alexandru Minea & Patrick Villieu, 2019. "Public debt versus Environmental debt: What are the relevant Tradeoffs?," Post-Print hal-02315163, HAL.
    5. Howard Haughton & Jodie Keane, 2021. "Alleviating debt distress and advancing the sustainable development goals," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(3), pages 528-536, May.
    6. Combes, J.-L. & Combes Motel, P. & Minea, A. & Villieu, P., 2015. "Deforestation and seigniorage in developing countries: A tradeoff?," Ecological Economics, Elsevier, vol. 116(C), pages 220-230.
    7. Suzi C. Kerr, 2013. "The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 47-66, January.
    8. Danny Cassimon & Dennis Essers & Achmad Fauzi, 2014. "Indonesia's Debt-for-Development Swaps: Past, Present, and Future," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 50(1), pages 75-100, April.
    9. Vatcharin Sirimaneetham, 2021. "Fiscal policy options to build forward better," MPDD Working Paper Series WP/21/07, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    10. Danny Cassimon & Dennis Essers & Karel Verbeke, 2015. "What to do after the clean slate? Post-relief public debt sustainability and management," BeFinD Working Papers 0103, University of Namur, Department of Economics.
    11. Cardenas, J. C. & Jaramillo, F & León, D & López, M. & Rodríguez, M & Zuleta, H, 2021. "With a little help from my friends: Debt Renegotiation and Climate Change," Documentos de Trabajo 19732, Universidad del Rosario.
    12. Kinda, Harouna & Thiombiano, Noël, 2024. "Does transparency matter? Evaluating the Impacts of the Extractive Industries Transparency Initiative (EITI) on Deforestation in Resource-rich Developing Countries," World Development, Elsevier, vol. 173(C).
    13. Jamie M. Sommer & Michael Restivo & John M. Shandra, 2020. "The United States, Bilateral Debt-for-Nature Swaps, and Forest Loss: A Cross-National Analysis," Journal of Development Studies, Taylor & Francis Journals, vol. 56(4), pages 748-764, April.
    14. Danny Cassimon & Martin Prowse & Dennis Essers, 2014. "Financing the Clean Development Mechanism through Debt-for-Efficiency Swaps? Case Study Evidence from a Uruguayan Wind Farm Project," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(1), pages 142-159, January.
    15. Marion Davin & Mouez Fodha & Thomas Seegmuller, 2023. "Pollution in a globalized world: Are debt transfers among countries a solution?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 21-38, March.
    16. repec:nam:befdwp:3 is not listed on IDEAS
    17. repec:hal:wpaper:halshs-00555625 is not listed on IDEAS
    18. Essers, Dennis & Cassimon, Danny & Prowse, Martin, 2021. "Debt-for-climate swaps in the COVID-19 era: killing two birds with one stone?," IOB Analyses & Policy Briefs 43, Universiteit Antwerpen, Institute of Development Policy (IOB).
    19. Hiroshi Ito & Ryosuke Sekiguchi & Toshiyuki Yamawake, 2018. "Debt swaps for financing education: Exploration of new funding resources," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1563025-156, January.
    20. Anastasia Telesetsky, 2023. "Multilateral Debt Relief for Clean Ocean Energy," Sustainability, MDPI, vol. 15(20), pages 1-20, October.
    21. Edward B. Barbier, 2022. "The Policy Implications of the Dasgupta Review: Land Use Change and Biodiversity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(4), pages 911-935, December.
    22. Cassimon, Danny & Essers, Dennis, 2013. "A chameleon called debt relief," IOB Working Papers 2013.01, Universiteit Antwerpen, Institute of Development Policy (IOB).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iob:wpaper:2009007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hans De Backer (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.