2026 Perspectives for the Public Sector

In addition, this debt conversion was enabled by a €240 million partial policy-based guarantee provided by the World Bank Group Guarantee Platform that allowed Cote d’Ivoire to refinance close to €400 million of expensive commercial debt. Future debt conversions under the newmodel may be able to leverage the full suite of guarantee products offered by the World Bank Group Guarantee Platform, potentially combining the credit enhancement capabilities of the International Bank for Reconstruction and Development (IBRD) and the Multilateral Investment Guarantee Agency (MIGA). 7 This would create a highly robust risk mitigation package that not only reduces the cost of capital for sovereigns, but that also provides a comprehensive shield against both financial and political uncertainties. This model sets another precedent for layering different forms of credit enhancement to achieve optimal outcomes. 8 Recommendations for the Future Even though with every new debt conversion there have been incremental improvements to achieve higher structural efficiency, there is room for further improvement under the application of an overarching set of principles. 1. Integrate into Comprehensive Debt Strategies Debt conversions should not be viewed as isolated, opportunistic transactions. Instead, they must be treated as an integral part of a sovereign’s medium-term debt management strategy. This integration ensures that the debt relief and fiscal space generated are systematically aligned with national development plans, macroeconomic stability objectives, and long-term fiscal sustainability. By embedding debt conversions within broader strategic frameworks, countries can optimize their impact and ensure sustained commitment to the agreed-upon development goals. This requires robust debt management capacity within finance ministries and strong inter-ministerial coordination. 2. Diversify Beyond Nature/Conservation The success of transactions like Barbados and Cote d’Ivoire in 2024 highlight the potential for diversifying the scope of debt conversions. 9 While environmental conservation remains critical, future transactions should increasingly target broader development goals. This includes climate change, adaptation and mitigation (e.g., renewable energy projects, resilient infrastructure), social development (e.g., health, education), infrastructure and even specific sectoral reforms. Advancing this trend requires continued innovation in financial structuring and a willingness from governments, credit enhancers and project implementers to think outside the box to broaden the range of situations and assets where this construct can be applied. 3. Regional or Pooled Structures For smaller sovereigns, particularly those with limited individual debt volumes or administrative capacity, aggregating deals through regional development banks or pooled facilities could significantly enhance efficiency and attractiveness. Regional development banks, with their inherent understanding of local contexts and established relationships, are ideally positioned to act as conveners and facilitators for such pooled arrangements. This approach could reduce transaction costs, achieve economies of scale, generate standardization and transparency across transactions and provide access to the benefits of debt conversions for countries that might otherwise find it prohibitive. It would also foster regional cooperation on shared development objectives. Most recently, multiple development banks, under the coordination of the IDB, are working on a regional debt for resiliency conversion facility for the Caribbean, with Barbados set to be the first test case under this first-of-its-kind approach. 10 4. Standardization and Replicability While each debt conversion inherently possesses unique characteristics, a greater degree of standardization in documentation, legal frameworks, and performance metrics could significantly enhance replicability and reduce transaction costs. Developing a suite of standardized templates for various components of these deals (e.g., SPV structures, commitment agreements, credit enhancement terms) would streamline the process and reduce the need for bespoke legal and financial advisory services for every transaction. This wouldmake debt conversions more accessible, faster to execute, andmore predictable for all stakeholders, ultimately contributing to their scalability andwider adoption. 7 Innovative Finance for Education: How Côte d’Ivoire’s Debt Swap is Creating NewOpportunities, MIGA 8 Côte d’Ivoire’s Debt-for-Development Swap, Enabled by the World Bank Group, Will Free up Funds for Education, World Bank Group 9 Côte d’Ivoire’s Debt-for-Development Swap, Enabled by the World Bank Group, Will Free up Funds for Education, World Bank Group 10 IDB Creates Fund to Strengthen Caribbean Integration, Provides R$1.6 billion to Haiti in Grants, and Prepares an UnprecedentedMulti-Country Debt Exchange, IDB Citi Perspectives for the Public Sector 21