By Karin Strohecker
LONDON (Reuters) – The World Bank said on Thursday it had helped Ivory Coast launch a debt-for-education swap in a landmark first transaction for the Washington-based lender.
The Ivory Coast government will buy back 400 million euros ($423 million) of its most expensive commercial debt due in the next five years with the help of a commercial loan raised at a lower interest rate, a longer maturity and a grace period thanks to a partial World Bank guarantee, it said in a statement.
The debt swap will free up around 330 million euros over the next five years and generate savings of at least 60 million euros, which Ivory Coast will invest in education, it added.
The transaction marks the first time the World Bank has taken part in a debt-for-development swap – a type of transaction that can help to pay for climate, health, education or green finance projects with the savings generated from replacing more expensive debt with cheaper one.
While such swaps have become increasingly popular in recent years, experts have pointed out many of the transactions had a multitude of entities involved, all incurring fees which eat into the savings earmarked for development projects.
Ecuador used a special purpose vehicle (SPV) for debt swaps aimed at conservation projects in the Amazon rainforest and Galapagos Islands.
“Unlike other swaps that use costly structures, including offshore special-purposes vehicles and trust funds that often incur significant transaction, administrative, and financial costs, this operation uses country systems already in place,” the World Bank said.
($1 = 0.9458 euros)
(Reporting by Karin Strohecker; Editing by Alexander Smith)
