Theory, practice and potential of debt for development swaps in the Asian and Pacific region

This paper discusses to what extent debt relief embedded in debt swaps linked to development can be helpful in reaching development goals such as the Millennium Development Goals. A range of historical and current international debt relief practices and proposals is assessed on the basis of their ability to generate additional resources and their effectiveness in channeling these resources towards development by ways of earmarking. It is argued that traditional debt for development swaps, because of their marginal and micro-earmarked nature, are less efficient and effective than larger scale operations such as those that are linked to the PRSP ('debt for PRSP swaps') as in the HIPC Initiative and recent extensions. Observing that current practice largely bypasses the Asian and Pacific countries, we finally assess to what extent there is an untapped potential to promote debt swaps for this region.