On Thursday (5), Angola received formal approval from the World Bank (WB) and its Multilateral Investment Guarantee Agency (MIGA) for important financial guarantees that will support a debt-for-education swap operation, which the country is structuring to finance the construction of new schools.
Debt swaps aim to reduce interest payments so that governments can spend more on essential areas. Angola’s operation is expected to be only the second supported by the WB, after the first one carried out just over a year ago in Côte d’Ivoire.
The Angolan government is preparing to buy back up to $400 million of its most expensive commercial debt, using a new loan with much lower costs, thanks to two guarantees from the World Bank and MIGA that cover repayments if difficulties arise. The resulting financial savings will then be used to build new schools and finance other improvements in the education sector.
“This operation demonstrates the power of the Guarantee Platform for both liability management and human capital development,” said MIGA Director for Industries Muhamet Bamba Fall.
The international financial institution also approved an additional loan of US$750 million as part of a “development policy support loan.” Angola is expected to use this amount to expand the Lobito Corridor, a strategic initiative linking the mining centers of Zambia and the Democratic Republic of Congo to the Angolan port of Porto do Lobito.
In a context where rich countries are reducing official development assistance and many states are facing high levels of debt, several governments are resorting to creative solutions, such as debt swaps, to finance projects ranging from coral reef protection to school funding, as in the case of Angola.
After remaining on the sidelines until the operation carried out in Côte d’Ivoire in 2024—also aimed at building schools—the World Bank now claims to have a significant portfolio of similar operations in the pipeline.
Angola has also recently indicated that it is planning a debt-for-health swap, although it has not yet revealed who will provide the credit guarantees considered essential for the operation.
Source: Reuters
