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Mr. Marcos d Chamon, Erik Klok, Mr. Vimal V Thakoor, and Mr. Jeromin Zettelmeyer

of a “blue bond” used to finance the loan. Debt swaps have been part of the debt restructuring landscape since the Latin American debt crisis . Early debt-nature swaps include a 1987 tripartite swap with Bolivia led by Conservation International and a 1989 bilateral swap between The Netherlands and Costa Rica. Since then, well over 100 debt swap operations have been conducted: at least 50 trilateral swaps and approximately 90 bilateral debt swaps involving about 15 official creditors (in some cases, more than one at a time) and benefiting about 30 creditors ( CRS

Mr. Marcos d Chamon, Erik Klok, Mr. Vimal V Thakoor, and Mr. Jeromin Zettelmeyer
This paper compares debt-for-climate swaps—partial debt relief operations conditional on debtor commitments to undertake climate-related investments—to alternative fiscal support instruments. Because some of the benefits of debt-climate swaps accrue to non-participating creditors, they are generally less efficient forms of support than conditional grants and/or broad debt restructuring (which could be linked to climate adaptation when the latter significantly reduces credit risk). This said, debt-climate swaps could be superior to conditional grants when they can be structured in a way that makes the climate commitment de facto senior to debt service; and they could be superior to comprehensive debt restructuring in narrow settings, when the latter is expected to produce large economic dislocations and the debt-climate swap is expected to materially reduce debt risks (and achieve debt sustainability). Furthermore, debt-climate swaps could be useful to expand fiscal space for climate investment when grants or more comprehensive debt relief are just not on the table. The paper explores policy actions that would benefit both debt-climate swaps and other forms of climate finance, including developing markets for debt instruments linked to climate performance.
Ms. Magdalena Polan, Parmeshwar Ramlogan, and Mr. Carlos I. Medeiros

Debt Buybacks and Swaps in Emerging Market Countries Figure 2: Illustration of the Decision-Making Process Figure 3: Illustration of Decision Rule 1 Appendix A Hypothetical Debt Swap Operation References

and gross accumulation of domestic and external arrears; (iv) external loan receipts and principal payments; (v) bank and nonbank financing, discriminating the domestic assets from liabilities; (vi) debt cancellation and debt swap operations; (vii) any other revenue, expenditure, or financing not included above.  Stocks of public domestic debt and external debt.  The monthly debt service projected for the next 12-months and annual debt service for the outer years. B. Ceiling on the Net Domestic Credit by the Central Bank Definition 4. There will

International Monetary Fund. External Relations Dept.

the banking system are important pillars of the country’s economic strategy and have been vital in helping withstand turbulent international financial conditions in recent years. The IMF therefore welcomes the authorities’ reaffirmation of their commitment to these policies. “The IMF welcomes the authorities’ efforts to engage creditors in a voluntary debt-swap operation aimed at reducing gross financing requirements in the period ahead, and looks forward to an outcome that will support medium-term financing sustainability. “In adopting the new measures, the

Ms. Magdalena Polan, Parmeshwar Ramlogan, and Mr. Carlos I. Medeiros
This paper sets forth some basic principles that could help debt managers in emerging market and other countries to plan and implement sovereign debt buyback and swap operations. It discusses the macroeconomic context in which buybacks and swaps are undertaken, the objectives of buybacks and swaps, the analytical framework for deciding whether to undertake a particular buyback or swap operation and for selecting among alternative operations, and some key issues in the determination of the strategy for executing buybacks and swaps. The focus is on developing the analytical framework for evaluating sovereign debt buyback and swap operations, since very little work has been done in this area. In this regard, the paper presents a step-wise decision-making procedure, in which discounted cash flow analysis and the use of strategic benchmarks for the debt play central roles.
Mr. Khaled Hussein
This paper develops a simple model of foreign debt portfolio management. The model suggests that, under mild conditions, the currency composition of a country's foreign debt portfolio is responsive to exchange rate movements. Empirical evidence is provided for a panel of 14 emerging economies in the period 1970-98. Attention is focused on the stocks of foreign liabilities denominated in U.S. dollars, deutsche marks (DM), Japanese yen, and Swiss francs. The results of the empirical analysis show that foreign debt portfolio management has been sub-optimal in the countries under examination. In these countries, the currency composition of foreign debt has not reflected a substitution effect away from the currencies that have appreciated over time vis-à-vis the U.S. dollar.