In debt restructuring, forgiving a portion of a developing country's foreign debt in exchange for commitments to environmental conservation is known as which mechanism?

• A. Debt-for-nature swaps
• B. Green bonds
• C. Debt relief
• D. Environmental loans

Answer: (A)

Debt-for-nature swaps are arrangements where part of a developing country’s external debt is forgiven in exchange for commitments to conserve natural resources and protect ecosystems. The forgiven debt is typically redirected into a conservation fund or used to finance protected areas, reforestation, or biodiversity programs, often managed with the help of an NGO and monitored by the creditor. This ties financial relief to tangible environmental outcomes, giving the debtor country a clear incentive to prioritize conservation while easing debt burdens.

Green bonds are debt instruments raised to fund environmental projects but do not involve forgiving existing debt. Debt relief in general refers to reducing or canceling debt without necessarily linking it to conservation actions. Environmental loans are extended credits with environmental criteria, not debt forgiveness.