Ahmad Umar Suffian, Safdar Sadia, Azam Muhammad
Department of Economics, Science and Technology, Federal Urdu University of Arts, Islamabad, Pakistan.
Department of Economics, Ghazi University, Dera Ghazi Khan, Pakistan.
Environ Sci Pollut Res Int. 2024 Jan;31(4):5716-5734. doi: 10.1007/s11356-023-31577-3. Epub 2023 Dec 21.
Bilateral debt swap is an innovative global financing mechanism designed to support heavily indebted countries (HICs). It is a debt-restructuring process involving donor countries forgiving debt owed by HICs in exchange for commitments to undertake projects on environment and socio-economic development. It is a unique approach designed to help heavily indebted countries get back on their feet. Effective debt swap financing can lead to both economic growth and environment sustainability, but they are challenging to implement. This study examines the impact of bilateral debt swap financing on economic growth and environment sustainability. For the purpose, we have used debt swap index developed with Kaiser-Meyer-Olkin (KMO) methodology. KMO widely used approach of Principle Component Analysis (PCA) to solve the problem of "over-identification" and make strong correlation among endogenous variables of interest. In order to validate the nexus empirically between bilateral debt swap financing with economic growth and environment sustainability, we have employed the Two-Step System Generalized Method of Moments (SYS-GMM) approach in 25 countries for the period of 2002 to 2021. This modern econometric method addresses endogeneity issues and controls for unobserved heterogeneity in panel data. At the same time, the technique addresses the simultaneity problem, reverse causality, and remove selection bias. Findings of the study shows that effective bilateral debt swap financing can boost economic growth and environment sustainability by investing domestic resources for targeted activities along with reduced debt burden. Empirical results reveal that 1% change in debt swap financing can lead to a maximum of 0.23% growth in the economy and 0.28% improvement in environment sustainability. However, it is important to note that in most empirical specifications, results are inconclusive. One possible reason for this is often ineffective debt swap practices coupled with inadequate monitoring and evaluation in HICs. Policymakers should focus on enhancing debt swap policies to promote economic growth and environment sustainability.
双边债务互换是一种旨在支持重债国的创新性全球融资机制。它是一个债务重组过程，涉及捐助国免除重债国所欠债务，以换取重债国承诺开展环境和社会经济发展项目。这是一种独特的方法，旨在帮助重债国重新站稳脚跟。有效的债务互换融资既能带来经济增长，又能实现环境可持续性，但实施起来具有挑战性。本研究考察了双边债务互换融资对经济增长和环境可持续性的影响。为此，我们使用了采用凯泽-迈耶-奥尔金（KMO）方法开发的债务互换指数。KMO是主成分分析（PCA）中广泛使用的方法，用于解决“过度识别”问题，并使感兴趣的内生变量之间具有强相关性。为了从实证上验证双边债务互换融资与经济增长和环境可持续性之间的联系，我们在2002年至2021年期间对25个国家采用了两步系统广义矩估计（SYS-GMM）方法。这种现代计量经济学方法解决了内生性问题，并控制了面板数据中未观察到的异质性。同时，该技术解决了同步性问题、反向因果关系，并消除了选择偏差。研究结果表明，有效的双边债务互换融资可以通过将国内资源投资于目标活动并减轻债务负担来促进经济增长和环境可持续性。实证结果显示，债务互换融资1%的变化最多可导致经济增长0.23%，环境可持续性提高0.28%。然而，需要注意的是，在大多数实证规范中，结果尚无定论。一个可能的原因往往是债务互换做法无效，再加上重债国的监测和评估不足。政策制定者应专注于加强债务互换政策，以促进经济增长和环境可持续性。
