Debt2Ed in Côte d’Ivoire
Côte d’Ivoire has been a GPE partner since 2010. It is the first partner country to leverage a debt swap using Debt2Ed.
Debt swaps are agreements between a creditor and a debtor where the existing debt is replaced with a new financial instrument or commitment. These arrangements often result in financial relief for the debtor and a redirection of cash flows towards specific goals, in this instance towards education programs in Côte d’Ivoire.
Given the spiraling debt environment across partner countries, debt swaps have gained increased attention in recent times, from both creditor and debtor countries.
The Debt2Ed agreement was facilitated by GPE in collaboration with France and Côte d’Ivoire, who had previously agreed to a debt swap transaction. This debt treatment results in increased fiscal space to invest in the country’s education system.
Côte d’Ivoire’s debt servicing to France will be transformed into new and additional financing to invest in priority actions and reforms to help get more children in school and learning. Côte d’Ivoire will continue servicing its debt to France as creditor, in accordance with the debt payment schedule negotiated bilaterally.
As soon as the repayment is made, France will transfer the equivalent amount to Côte d’Ivoire in the form of a grant, which will be deposited in a dedicated account in the country’s Central Bank. The GPE Multiplier enabled the country to leverage additional co-financing totaling $182 million for the education sector.
Context-specific and flexible financing
Different partner countries have different challenges. In some instances, partner countries may want to work with creditors and donors to lower the costs of repaying existing loans. Others have room to borrow but want to lower the cost of that borrowing to protect their fiscal health and invest more in education.
Recognizing the need for flexibility while embracing a pragmatic approach, Debt2Ed can apply to both debt swaps and loan buydowns.
In a debt swap, the creditor and partner country (the borrower, also called the debtor) agree to a debt treatment that reduces the debt service payments of an outstanding loan in exchange for a counterpart payment from the borrower to the education sector.