Using debt-for-sustainable-development swaps

Environment and health (EH) and sustainable development are inextricably linked and require a long-term commitment to local implementation. Every local EH project implemented should be regarded as a sustainable development project. If a change introduced by a project cannot be sustained, then it will fail to make a lasting improvement to a community. The promotion of better health, through the avoidance of illness and a higher quality of life, is integral to the objective of sustainable development. Poverty, inequality and pollution affect human health. Consequently, poor health is a powerful indicator of activities that do not meet the objective of sustainability.

UNICEF pioneered a debt-for-child-development swap programme in 1989. This programme ensures funding which supplements UNICEF ongoing contributions as UNICEF general resources are not used for debt conversions. As of June of 1993, UNICEF had completed 12 operations in five countries: Bolivia, Jamaica, Madagascar, the Philippines and the Sudan, and in December 1993, a further transaction was completed in Senegal. External debt stock for these countries has been reduced by over US$100 million, while the swap programmes have generated about $28 million. Local funds resulting from these conversions supplement primary education, women in development, disadvantaged children, primary health care and water supply and sanitation programmes.

Debt for health swaps have also become an attractive mechanism through which financial resources can be generated for sustainable development programmes. Programmes have been initiated for the prevention and treatment of river blindness. In 1993, the River Blindness Foundation bought S1 million of Nigerian commercial debt at a 40% discount. The Nigerian Central Bank will redeem this debt at about 50% of its face value generating local currency funds for the mass distribution of Ivermectin, a drug used to combat onchocerciasis.

With the alarming rise of the HIV/AIDS infections, the Debt for Development Coalition operating from Washington has initiated a programme, Swaps against AIDS, for AIDS control and prevention. The macroeconomic impact of AIDS treatment costs depends on how they are financed. To the extent that these costs are financed by reducing other government or private consumption, they will have no impact on the future growth of GDP. However, if the cost of treating AIDS patients is financed from saving, and this reduction in savings is not offset by increased foreign saving, investment will have to be reduced and future growth will suffer.

Finally, a debt-for-education swap programme was brought to the forefront by Harvard University when in 1990 it bought $5 million of Ecuadorian debt at a discount of 84%. Fifteen percent of the proceeds were invested in an Ecuadorian money market fund to finance travelling expenses and stipends for 50 Harvard students and faculty for 10 years to perform research. Another portion was invested in a USA money market fund to finance 20 Ecuadorian students at Harvard for 10 years. Harvard then implemented a similar swap in Mexico in 1991.