The debt-for-climate concept, which was propagated by International Monetary Fund (IMF) MD Kristalina Georgieva in April, has been adopted by the South African Deputy Finance Minister David Masondo and the South African Communist Party, which is part of the country’s ruling coalition.
The IMF plans to raise the idea at the COP26 climate conference in Glasgow in November.
The initiative would have multiple benefits for Africa’s biggest emitter of greenhouse gases. South Africa’s finances have been battered by its debt-ridden electricity company, Eskom Holdings, which has required repeated bailouts and cash injections. The government is also seeking financing to switch Eskom from mostly coal-fired power to cleaner renewable energy.
The price tag for that transition would be tremendous, though, costing as much as R400-billion, according to Masondo, the deputy finance minister. Under his proposal, R146-billion to R213-billion of sovereign debt would need to be forgiven or deferred, allowing the government to give Eskom an equity injection, help it secure green financing and close polluting power plants.