Debt-for-AIDS swaps: a UNAIDS policy information brief

This policy information brief on debt-for-AIDS swaps is intended to provide further insights into debt swaps, along with examples of their use in the context of development projects, and their relative strengths and weaknesses as instruments for financing the scaling-up of HIV/AIDS programmes.

The paper begins with a brief, conceptual overview of various categories of swaps, which defines a debt swap (or debt conversion) as the cancellation of external debt in exchange for the debtor government’s commitment to mobilize domestic resources for an agreed purpose. The second part of the paper discusses the advantages and disadvantages with regard to swaps in general.

The paper examines the relevance of swaps in the specific context of combating HIV/AIDS, and finds that quantitatively speaking the HIPC and various bilateral debt relief schemes at present represent appreciably larger amounts of savings than current debt-conversion schemes. However, it emphasises that the qualitative aspects of debt-for-AIDS swaps may be considerable, and may reach beyond their quantitative magnitude. These include:

• cooperation between international and domestic NGOs is common in debt-for-development swaps, and specialized UN agencies (such as UNICEF and UNAIDS) can play an essential role as catalytic fundraisers and by providing technical assistance
• twinning arrangements have often proved to be highly successful in past swaps—for example, in debt-for-nature swaps when international conservation organizations have established cooperation with NGOs or public conservation agencies in developing countries
• debt-for-AIDS swaps have a considerable potential to create publicity and raise general awareness of the need to join forces in the fight against the HIV/AIDS epidemic and, as in the case of debt-for-nature swaps, it ought to be possible to raise matching contributions to finance HIV/AIDS programmes from both official and private donors
• in all likelihood, a number of private creditors, such as commercial banks, could be prepared to cancel, not least for goodwill reasons, some of their developing-country debt in exchange for HIV/AIDS programmes
• when the debtor government has developed its own coherent HIV/AIDS programme, funds generated by swaps can, of course, be channelled to support and scale up such programmes
• in other situations, the development of innovative and replicable programmes and projects can be of great help in the policy dialogue with a government that is not wholly committed to the fight against HIV/AIDS, or that lacks the technical knowledge about what does and does not work

The paper concludes that swaps offer no panacea, only an additional instrument that certain countries, in collaboration with creditors, international organizations and bilateral donors, can use as part of their overall debt and AIDS strategies.