Policy Papers

Debt for Development Swaps: An Approach Framework

August 5, 2024

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International Monetary Fund. Strategy, Policy, & Review Department, and World Bank. "Debt for Development Swaps: An Approach Framework", Policy Papers 2024, 038 (2024), accessed December 21, 2024, https://doi.org/10.5089/9798400284625.007

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Summary

The aim of this note is to help stakeholders optimize their decision-making on when, where, and how to use debt-for-development swaps (“debt swaps”), ensuring they bring the intended benefits to all parties involved. It also proposes new approaches to structure these mechanisms, making them less transaction-heavy and more sustainable while maintaining accountability for fulfilling policy and spending commitments. Debt swaps are agreements between a government and one or more of its creditors to replace existing sovereign debt with one or more liabilities1 that include a spending commitment towards a specific development goal. These goals may include nature conservation, climate action, education, nutrition, support for refugees, among others. The spending commitment is often associated with the country's decision to pursue an important development policy.

Subject: Asset and liability management, Debt conversion, Debt management, Debt service, Debt sustainability, Expenditure, External debt

Keywords: Debt amortization profile, Debt conversion, Debt management, Debt service, Debt sustainability, Debt sustainability prospect, Expenditure commitment, Expenditure efficiency perspective, Expenditure program commitment, Global, Spending commitment, Transparency policy

Publication Details

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