World Bank, Spain launch Global Hub for debt swaps

LONDON: Spain has partnered with the World Bank to help countries free up money to spend on sustainable development projects via debt swaps, the country’s Ministry of Economy said on Tuesday.

With rich governments cutting official development aid and many countries spending more on servicing debt than on development, nations are turning to creative ways to find cash to support projects ranging from protecting coral reefs to paying for water sanitation projects and schools.

The Global Hub for Debt Swaps for Development, launched at the Finance for Development summit in Seville, southern Spain, will provide countries with technical and financial assistance as they look to reallocate finance to projects like food security and climate adaptation, the Spanish government said.

Countries from Barbados to the Ivory Coast have used debt-swap mechanisms over the last year to buy back more expensive loans or bonds and refinance them at cheaper rates, while pledging to use the savings for social and environmental projects.

But critics say such deals can be time-consuming, costly and hard to replicate, which has prevented more widespread adoption of a tool advocates say is critical to helping countries reduce debt burdens and address development issues.