Environment in emerging and transition economies

Institutional Support to Georgian Debt-for-Environment Swap

 

In its co-operation with the EECCA countries on debt for environment swaps, the EAP Task Force focuses on analysing opportunities for and feasibility of such swaps and on developing domestic capacity of eligible countries for effective negotiations with potential creditors for implementing such schemes. The first pilot project was developed in co-operation with the Georgian Government and financially supported by the EU TACIS and the Netherlands. The Georgian experience can serve as guidance to other poor, indebted countries considering debt for environment swaps.

The Georgian Government has made significant progress in advancing this idea in the country. In 2001, a clause enabling such a swap was incorporated into the debt restructuring agreement with the Paris Club creditors. Soon afterwards, a special inter-ministerial Task Force was set up. In 2002, the Ministry of Environment with support of the EAP Task Force, started the preparation of a pre-feasibility study. In February 2003, the Ministry of Environment, in cooperation with the Ministry of Finance, hosted the first international hearing on the debt for environment swap opportunities for Georgia. The meeting attracted high level representatives from the key Ministries, the Parliament, international organisations (including the IMF, the World Bank and the UNDP), several creditor governments and NGOs. In July 2004, Georgia had a second restructuring agreement with the Paris Club which also included a clause on swaps. Following this agreement, the analysis in the pre-feasibility study, concerning creditors’ profile and expected revenue which could be generated from potential DFES, was updated.

The main conclusion of the pre-feasibility study and the international consultations is that a debt for environment swap between Georgia and creditors of the Paris Club is realistic and, if properly designed, could generate additional environmental expenditure for Georgia and benefits for the international community, including creditors. However, this scheme also involves risks that need to be carefully mitigated. It will require a high-level commitment, determination and concerted efforts of the whole government. Georgia will have to demonstrate strong fiscal capacity, strong commitment to transparency and to the best governance standards.

The pre-feasibility study proposes priorities for an expenditure programme which meets the priorities of the whole government and creditors. Within each priority area, a preliminary identification of project opportunities was conducted in order to identify the types of projects that could achieve environmental benefits together with poverty reduction and local sustainable growth. In order to demonstrate how a solid pipeline of projects could be prepared within the expenditure programme, the Georgian Government and the EAP Task Force contracted a more detailed assessment of the project pipeline opportunities for the debt for environment swap. The study further scopes down priorities to be financed through this scheme.

The scoping report identifies specific, realistic and “bankable” project pipelines in three priority areas: (i) reducing GHGs; (ii) reducing pollution of international waters and (iii) enhancing biological diversity. The work was conducted under the guidance of the EAP Task Force, with financial support from the Netherlands. In addition, further detailed evaluation of these priority areas was conducted and five most promising pipelines for the expenditure programme of the potential Georgian debt-for-environment swap were identified. These pipelines include: biodiversity protection, biogas production, small and mini-hydropower generation, solid waste management and wastewater treatment projects. Even if the DFES does not materialise, the analysis will contain a well researched menu of opportunities for any international co-operation projects in Georgia.

The results of this analysis and specific recommendations can be found in the reports attached below. Mr. Renat Perelet is the scientific editor of the Russian translation of the report.

Files to download:

 

Related Documents

 

Debt-for-Environment Swaps

 

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