C?te d'Ivoire Debt-for-Development Swap
The C?te d'Ivoire Debt-for-Development Swap is a pioneering financial mechanism that transforms expensive debt into educational investments. Launched with support from the World Bank Group, this initiative targets approximately €400 million of C?te d'Ivoire's most expensive commercial debt that matures within five years. Through a partial credit enhancement from the World Bank Group guarantee platform, C?te d'Ivoire is able to buy back high-interest debt using a commercial loan with more favorable terms - lower interest rates, longer maturity, and a grace period. This transaction will free up around €330 million in budget resources over the next five years, generating lifetime savings of at least €60 million in net present value terms.
The freed resources are being directed toward building over 30 schools, including preschools, in underserved communities, with the aim of reaching 30,000 students. The initiative addresses both fiscal challenges and educational needs simultaneously, making it the first debt-for-development swap of its kind supported by the World Bank Group. Unlike traditional debt swaps that use costly structures like offshore special-purpose vehicles and trust funds, this operation utilizes existing country systems, increasing efficiency and maximizing the funds available for education.
Pros
Frees up significant fiscal resources (€330 million over five years) that can be directed to education investments
Generates lifetime savings of at least €60 million in net present value terms by replacing expensive debt with cheaper financing
Uses existing country systems rather than costly offshore structures, maximizing efficiency and available funds for education
Expands educational access in underserved communities, particularly for early childhood education where enrollment is only 10% compared to the Sub-Saharan African average of 28%
Creates measurable development outcomes through the construction of 30 schools reaching 30,000 students
Provides a replicable model for other countries facing similar debt and development challenges
Cons
Implementation complexity requires sophisticated financial management and coordination between multiple stakeholders
Success depends on continued fiscal discipline and effective education program implementation
The approach is relatively new, with limited long-term track record
Requires significant technical capacity within government to manage the financial restructuring
Education outcomes will take time to materialize and measure
Partners
World Bank Group (International Bank for Reconstruction and Development)
Government of C?te d'Ivoire
International commercial banks
Global Partnership for Education (GPE)
Agence fran?aise de d¨¦veloppement (for an earlier phase in 2023)