Debt Swaps Explored by Global Fund Targeting Health Investments

Global Fund has until now stuck to swaps of bilateral debt

Fund disburses $5 billion a year to fight HIV, TB, Malaria

‍The Global Fund, which disburses more than $5 billion annually to fight diseases, is exploring swapping publicly traded debt for public health investments.

The approach marks a departure from a model used by the fund since 2007, a period during which it oversaw the forgiveness of $367 million in bilateral debt owed by 10 developing nations to Spain, Australia and Germany. Those arrangements resulted in a combined $226 million in health investments.

The new approach mimics a framework pioneered by conservation organizations, the goal of which is to refinance existing debt at more favorable terms with savings put toward environmental protection. Such arrangements have been used by a growing list of nations, including Belize, Ecuador and Gabon.

“The Global Fund is currently exploring alternative ways and models to leverage this expertise, including debt swaps that involve a buyback component on currently outstanding debts,” the fund told Bloomberg in an emailed response to questions. “To the extent that any of the debt is traded on public markets, market-sensitive information is treated as strictly confidential,” it said.

The Global Fund didn’t say how the swaps would be structured or which countries might be involved.

“We are talking to several implementing countries for different types of innovative finance transactions,” the fund said.

Kenya’s Finance Minister, Njuguna Ndung’u, has said the country is discussing a debt for medicine swap with the fund and a debt for food security swap with the United Nations’ World Food Programme, Johannesburg’s Rand Merchant Bank said in a note on Friday.

“We have proposals on the table that we are exploring” in terms of a debt for medicine swap, Chris Kiptoo, principal secretary at the Kenyan Treasury, told Bloomberg. “No decision has been made yet on the amount and timelines. We are still exploring to see the best fit. We are also looking at other swaps like debt for nature, food too.”

The WFP didn’t immediately respond to a request for comment.

The Global Fund was created in 2002 to fight three scourges — HIV Aids, tuberculosis and malaria. The Switzerland-based fund secures donations from governments, private companies and foundations and says it has disbursed $60 billion, saved 59 million lives and cut the death rate from the three diseases by more than half in the nations where it invests.

The countries that have benefited from the bilateral debt swap program are Ethiopia, Indonesia, Jordan, the Democratic Republic of Congo, Sri Lanka, El Salvador, Egypt, Ivory Coast and Pakistan.

Source: Bloomberg