Process
The financing mechanism for debt-for-nature swaps is an agreement among the funder(s), the national government of the debtor country, and the conservation organization(s) using the funds. The national government of the indebted country agrees to a payment schedule on the amount of the debt forgiven, usually paid through the nation’s central bank, in local currency or bonds. The process is shown in Figure 1. Participation in debt-for-nature swaps has been restricted primarily to countries where the risk of default on debt payments is high. In these circumstances, the funder can purchase the debt at well below its face value.
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