Policy Papers

Debt for Development Swaps: An Approach Framework

Publication Date:

August 5, 2024

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Policy Paper No. 2024/038

Subject:

Asset and liability management Debt conversion Debt management Debt reduction Debt restructuring Debt service Debt strategy Debt sustainability Expenditure External debt Government debt management Public financial management (PFM)

Frequency:

occasional