FILE PHOTO: Spanish Minister of Economy, Trade, and Enterprise Carlos Cuerpo participates in a media interview at the International Monetary Fund (IMF) and the World Bank Group 2024 Fall Meeting in Washington, U.S., October 23, 2024. REUTERS/Kaylee Greenlee Beal/File Photo
LONDON (Reuters) -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.
"We have heard loud and clear the message from many countries: we need practical tools that make debt swaps simpler, faster, and more accessible," Spain's Minister of Economy, Trade, and Business Carlos Cuerpo said.
Spain will contribute 3 million euros ($3.54 million) to support the Hub, while the World Bank said it will host a "multi-partner trust fund to finance technical assistance".
"By turning successful pilot projects into repeatable solutions, we can ease debt burdens and unlock investments in education, health, and opportunity," World Bank Group President Ajay Banga said.
In the last two decades, Spain has signed 47 agreements with 28 countries, resulting in the forgiveness of 1.64 billion euros of debt.
The government has put in place a new national framework to sign bilateral debt swap agreements totaling up to 300 million euros over the next five years, the Economy Ministry said.
($1 = 0.8470 euros)
(Reporting by David Latona, writing by Virginia Furness; Editing by Sharon Singleton)
