Can Debt-for-Development Swaps become an asset class?

Yoan Raih

No 2516, FDL Policy Notes from CEPREMAP

Abstract: Commercial debt swaps have emerged as a strategic tool for governments seeking to manage and optimize their debt portfolios while advancing development objectives. Known as Debt-for-Development Swaps (D4D), these arrangements involve converting existing, often costly or short-term debt into more sustainable, long-term instruments. While not a miracle solution, D4D transactions have gained significant interest from policymakers, global institutions, and civil society, especially after major deals in 2021 and 2022. 2024 marked a turning point: D4D deals increased from five to nine, while debt refinancing reached $6.8 billion, generating $2.1 billion for development and climate goals. Despite these figures, swaps remain complex and need simplification. Questions about their maturity as an asset class persist. This note reviews recent deals, showing progress but highlighting ongoing challenges, particularly regarding transparency about financial savings, which are often unclear or misleading.

Keywords: Debt Swaps; Sovereign Debt Management; Credit Enhancement; Guarantees; Liability; Management Operations; Sustainable Finance (search for similar items in EconPapers)
Pages: 31 pages
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:notfdl:2516

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