The Debt-for-Nature Opportunity in Lao PDR – Design, Feasibility, Strategy


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The Debt-for-Nature Opportunity in Lao PDR – Design, Feasibility, Strategy

August 1, 2023

Protected areas are critical economic assets providing valuable ecosystem services. They have important revenue-generating potential. Faced with economic impacts of the COVID-19 Pandemic, the Government of Lao PDR has been exploring financing options to sustain the management of National Protected Areas. This involved the scoping of debt for nature potential in Lao PDR, with support from UNDP.  


The report argues that Lao PDR has high potential for a nature-linked thematic debt restructure given the country’s endowment of natural resources and the debt burden it faces due to the impacts of the COVID-19 pandemic. The report highlights three scenarios for which a debt for nature transaction could apply in the context of Lao PDR. This includes (1) engagement with multilateral debt relief initiatives, (2) a waiver of principal or interest reduction with a bilateral creditor and (3) the issuance of new debt instruments for conversion of existing debt obligations.  


The report further discusses the design options that would constitute a debt for nature transaction including the mechanism for restructuring or reducing debt obligations, the target for use of the proceeds, the mechanism for delivery of funding, the scale of the agreement, the target creditors, the target debt (loans or projects) subject to a restructuring agreement and the options of engaging third parties or other partners to an agreement.