This publication is aimed at helping IUCN's members to understand the scope and mechanisms of debt conversion and to spot opportunities for their own action in this important field.

The aim of this note is to help stakeholders optimize their decision-making on when, where, and how to use debt-for-development swaps (“debt swaps”), ensuring they bring the intended benefits to all parties involved. It also proposes new approaches to structure these mechanisms, making them less transaction-heavy and more sustainable while maintaining accountability for fulfilling policy and spending commitments. Debt swaps are agreements between a government and one or more of its creditors to replace existing sovereign debt with one or more liabilities1 that include a spending commitment towards a specific development goal. These goals may include nature conservation, climate action, education, nutrition, support for refugees, among others. The spending commitment is often associated with the country's decision to pursue an important development policy.

A debt swap is a form of debt conversion in which external hard currency debt is traded for local currency or debt denominated in local currency. Debt-for-nature swaps support specific environ. projects, i.e., the designation & mgmt. of protected areas, the dev¿t. of conservation mgmt. plans, the training of park personnel, & environ. educ. activities. Dev¿t. swaps support projects such as micro-enterprise, educ., training, health, ag. This report: ascertains the number of developing countries that have participated in debt swaps, the extent to which these swaps have reduced external debt, & the programs undertaken; assesses the advantages & disadvantages of debt swaps & the efforts of the U.S. AID to support voluntary org. that participate in such swaps.