Trending 
African countries are using debt strategically to fund sustainable initiatives in areas such as health, food, education, environment and urban planning. Debt-for-development swaps are redirecting savings from high-cost loans into measurable social and economic outcomes, strengthening fiscal resilience.
Kenya is pursuing one of Africa’s first major debt-for-food security deals, marking a shift in debt-for-development swaps beyond their recent emphasis on nature-based outcomes.
According to Reuters, the US$1 billion arrangement with the U.S. International Development Finance Corporation is expected to refinance costly commercial debt and redirect the interest savings into food security, nutrition and agricultural resilience.
For a country grappling with high debt-service obligations, climate-driven food shocks and foreign-exchange pressure from imports, the approach carries both fiscal and political weight.
According to the Tony Blair Institute for Global Change, African countries spend an average of 18% of government revenues on interest payments alone, despite carrying lower debt-to-GDP ratios than G7 economies, where interest absorbs just 3-5% of revenues.
That imbalance has narrowed fiscal space across the continent, crowding out public investment.
At roughly US$1 billion, Kenya’s proposed transaction would rank among the largest development-linked debt swaps globally. According to experts, its significance lies less in novelty. Drawing on experience from one of Africa’s most cited debt swaps, Alexander Mali, a Gabonese development economist, argues that outcomes matter more than headline debt relief.
“In Gabon we learned that swaps succeed when they create functioning institutions, clear accountability and verifiable outcomes. The real payoff is policy signalling and fiscal reprioritisation, not dramatic headline debt reduction, because those changes shape budgets for years.”
Debt-for-nature swaps have historically dominated Africa’s engagement with outcome-linked debt instruments. Gabon’s US500 million marine conservation swap in 2023, alongside earlier transactions in Belize and Ecuador, demonstrated that sovereign liabilities could be partially re-engineered to fund public goods while reducing borrowing costs.
However, the authors of Afronomicslaw, Adebayo Majekolagbe and Aurore Sokpoh, argue that such deals were never intended to resolve Africa’s debt problem at scale. Instead, most debt-for-nature swaps deliver only “modest relief” relative to total public debt stocks, trimming debt service by limited margins.
“The real value of swaps lies less in headline debt reduction and more in policy signalling, targeted fiscal reprioritisation, and creditor coordination. That assessment helps explain why governments are now adapting the model rather than abandoning it.”
If Africa has a reference case for debt swaps that moved beyond theory, it is Seychelles. The island state’s debt-for-nature swap, launched in 2016 and reinforced through its blue bond framework, remains one of the continent’s most operationally mature examples.
According to Jean-Paul Adam, Director at the UN Office of the Special Adviser on Africa, the transaction enabled the buy-back of US$21.6 million in external debt, financed through a US$15.2 million loan from The Nature Conservancy alongside US$5 million in grants from philanthropic partners.
Seychelles extended maturities on the restructured debt from an average of eight years to 13 years, easing near-term fiscal pressure while redirecting repayments into national development priorities. At the centre of the model was institution-building. The government established the Seychelles Conservation and Climate Adaptation Trust, SeyCCAT, through legislation, with equal representation from government and civil society.
Over the past 20 years, more than US$11 million in external debt service has been redirected into the domestic economy, much of it denominated in local currency. Food security has emerged as one of the most pressing political issues across the continent.
According to the World Bank, African countries collectively spend more than US$50 billion annually on food imports, exposing budgets to global price volatility and exchange-rate swings.
Kenya’s debt-for-food swap directly targets this vulnerability. Treasury documents indicate that savings from the DFC-backed refinancing will be channelled into agricultural infrastructure, nutrition programmes, and food-system resilience. President William Ruto framed the agreement as a way to replace costly debt with lower-cost financing, according to public statements reported by local and international media.
Notably, Kenya is also pursuing a parallel debt-for-food arrangement with the World Food Programme, expected to conclude in 2026. For Afronomicslaw, this pivot matters. Majekolagbe and Sokpoh note that swaps linked to socially visible outcomes such as food, health, or education are more likely to command domestic legitimacy than narrowly environmental instruments.
The shift also reflects broader multilateral concern. IMF Managing Director Kristalina Georgieva has warned that high debt-service costs in low- and middle-income countries are increasingly crowding out spending on health, education, and climate resilience. Kenya’s approach mirrors developments elsewhere on the continent.
In Côte d’Ivoire, the World Bank supported a €400 million (about US$475 million) debt-for-education swap that repurchased expensive commercial debt and redirected savings into school infrastructure and learning programmes. The deal targeted €370 million (about US$439 million) of high-cost commercial debt and is expected to free up approximately €330 million (US$392 million) over five years for education spending, with no increase in the country’s net debt stock, according to World Bank and IMF documentation.
In Southern Africa, Angola is advancing discussions on a debt-for-development swap, which is expected to redirect fiscal space toward health and education by mid-2026, according to multilateral policy briefings.
The Democratic Republic of Congo offers a parallel case from the climate and industrialisation flank. In December 2024, the government confirmed it was exploring a debt-for-nature swap to finance climate action while easing public debt pressures, following a technical study discussed at a workshop organised by the UN Economic Commission for Africa and the Ministry of Finance.
The study examined the DRC’s debt portfolio and identified potential projects across forest conservation, agriculture, battery manufacturing, and the electric-vehicle value chain.
“This debt swap represents an innovative opportunity to convert part of our debt into strategic investments in key sectors such as education, health, agriculture, and infrastructure,” said Doudou Fwamba Likunde Li-Botayi, the DRC’s Minister of Finance, according to ECA statements.
According to UN and ECA data, the DRC supplies more than 70% of global cobalt and approximately 10% of global copper, positioning it to more competitively anchor domestic battery precursor production than many global peers. Despite growing experimentation, debt swaps remain constrained tools.
Also, according to Afronomicslaw, ring-fenced swap structures can fragment public finance systems if they bypass parliamentary oversight or medium-term budget frameworks. Majekolagbe and Sokpoh also highlight legal asymmetries, noting that many swap agreements are governed by foreign law and negotiated with limited public disclosure. Verification is another constraint, as outcomes such as nutrition or industrial upgrading are harder to measure than environmental indicators.
However, according to Mali, debt-for-development swaps hold strategic value today on the continent, given the mounting debt distress affecting many countries.
“With more countries facing debt distress, swaps are becoming less about innovation and more about necessity. They allow governments to protect priority spending in food, health and education at a moment when conventional borrowing has become both expensive and politically constrained.”
The African Union estimates that more than 25 African countries are either in debt distress or at high risk. Africa’s development financing gap is also estimated at around US$200 billion per year.
At its Conference on Debt in Lomé in 2025, the AU explicitly endorsed the use of debt swaps as part of a broader toolkit to manage debt while safeguarding development priorities.
Credit: Boniface Orucho, Bird Story Agency.
