Swapping debt for development aid

Description

Swapping debt for development aid involves negotiating agreements where a portion of a developing country's external debt is forgiven or reduced in exchange for commitments to invest equivalent funds in local development projects. This strategy directly addresses unsustainable debt burdens by redirecting financial resources toward poverty reduction, education, health, or environmental initiatives, thereby fostering sustainable development while alleviating fiscal pressure on debtor nations. It provides a practical remedy to both debt distress and underfunded development priorities.

Implementation

Ecuador, Sudan and Zimbabwe have carries out debt-for-development swaps as a means of generating extra resources for both government and NGO-provided health services; Nigeria is also attempting a major swap of its debt currently held by donors in return for increased public spending for essential health services.