Turning debt Into development: Canada proposes swap solution
ECOFIN – In a moderated caucus on day 2 of LTMUN, the delegate from Canada introduced the concept of debt-for-development swaps describing it as a mechanism that transforms debt obligations into direct investments within the debtor’s own economy.
With this proposal, rather than channelling scarce resources into conventional repayments, debtor nations would be permitted to redirect funds towards domestic projects that generate long-term value. Examples cited included climate resilience initiatives, renewable energy ventures, and investment in education all with the potential to stimulate sustainable growth while tackling pressing global challenges.
To ground the idea, the Canadian delegate pointed to a real-world example between Canada and Moldova. Instead of demanding debt repayment, Canada allowed Moldova to invest the funds in climate-related projects. The result, the delegate explained, was mutually beneficial: Canada contributed to sustainable development abroad, while Moldova strengthened local resilience and innovation. “It doesn’t just look like repayment,” the delegate noted. “It looks like foreign investment, building value within the debtor country.”
The committee, discussing widespread debt distress in the Global South, welcomed Canada’s proposal. The Chair of the committee described it “an interesting submission”, as delegates agreed that debt-for-development swaps could help prevent defaults while supporting climate action and human capital growth.
As ECOFIN’s deliberations continue, Canada’s suggestion may ignite a broader debate: should debt repayment be reimagined?
Wekia Anewenah, Bloomberg, International Press Corps, LTMUN 2025
