Sovereign Debt-for-Development Swaps: Possibilities Ahead

This study explores the use of sovereign debt-for-development swaps as a mechanism to mobilise resources for development finance. Drawing from an UNCTAD-developed database documenting 235 debt swaps conducted across 58 countries since 1987, with a cumulative value exceeding USD 11.5 billion, the analysis highlights their application in areas such as health, climate, poverty reduction, and conservation. While the database underscores the potential of debt swaps, the study considers how a South-South platform could foster knowledge sharing and capacity building among developing countries. Sovereign debt-for-development swaps have gained prominence due to recent implementations in Belize, Barbados, Ecuador, and Egypt, which have redirected significant resources toward developmental priorities. These instruments have the potential to alleviate debt burdens and create fiscal space for underfunded projects, making them a valuable addition to the development financing toolbox. However, their high transaction costs, especially for multi-party agreements, and the complexity and time required for their execution limit their broader applicability. Scaling up their usage requires the development of a pipeline of fundable projects that are integrated into the executing country's national development plans, reducing transaction costs, and building local capacity through repeated implementation.