Basic guide to using debt conversions

In a debt conversion, the group uses hard currency to buy discounted debt from an international creditor. The debt is then delivered to the Central Bank and Ministry of Finance of a debtor country and retired. In exchange, the group receives local currency, in an amount equivalently greater than the hard currency it paid to retire the debt, to pursue its programs within the debtor country. This document offers a brief guide to debt conversion, with emphasis on Africa. Chapter 2 explains the basics of debt conversion, and describes who participates and why. It also lists what is required of an organization planning to use this financing method in order to help the reader decide whether debt conversion is a suitable option for his or her organization. Chapter 3 details the procedure that the organization and the debtor government need to follow. This section describes what the reader needs to initiate a debt conversion. Appendix A summarizes several recent debt conversions in Africa. Appendix B defines terms that may prove useful for doing additional research and for communicating with bankers. Appendix C lists additional resources. (Author abstract, modified)