Debt swaps for financing education: Exploration of new funding resources

Abstract

As an innovative financial mechanism to explore additional funds for social development programs in developing countries, debt swaps for development, including debt-for-education swaps, became popular between the 1980s and 2000s. Their popularity, however, seems to have diminished since the beginning of the 2010s. This article describes debt swaps for development with a focus on debt-for-education swaps, explaining how they became popular, examining why they have lost momentum, and exploring whether debt-for-education swaps are a feasible option for funding social development programs. Despite recent economic recovery and growth worldwide, one of the key obstacles for achieving the United Nations’ Sustainable Development Goal 4—to ensure inclusive and equitable quality education and promote lifelong learning opportunities for all—remains inefficient funding for education programs in developing countries. Based on the findings, this article argues for the feasibility of debt-for-education swaps to seek funding with a number of conditions.

Full text

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Debt swaps for financing education: Exploration of new
funding resources
Hiroshi Ito,Ryosuke Sekiguchi and Toshiyuki Yamawake
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© 2018 The Author(s). This open access article is distributed under a Creative
Commons Attribution (CC-BY) 4.0 license.
Publisher: Cogent OA
Journal: Cogent Economics & Finance
DOI: http://dx.doi.org/10.1080/23322039.2018.1563025

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Debt swaps for financing education:
Exploration of new funding resources
Abstract
As an innovative financial mechanism to explore additional funds for social
development programs in developing countries, debt swaps for development, including
debt-for-education swaps, became popular between the 1980s and 2000s. Their
popularity, however, seems to have diminished since the beginning of the 2010s. This
article describes debt swaps for development with a focus on debt-for-education swaps,
explaining how they became popular, examining why they have lost momentum, and
exploring whether debt-for-education swaps are a feasible option for funding social
development programs. Despite recent economic recovery and growth worldwide, one
of the key obstacles for achieving the United Nations’ Sustainable Development Goal
4—to ensure inclusive and equitable quality education and promote lifelong learning
opportunities for all—remains inefficient funding for education programs in developing
countries. Based on the findings, this article argues for the feasibility of
debt-for-education swaps to seek funding with a number of conditions.
Authors
Hiroshi Ito, Faculty of Economics, Nagoya University of Commerce and Business
Ryosuke Sekiguchi, Faculty of Commerce, Nagoya University of Commerce and
Business
Toshiyuki Yamawake, Faculty of Economics, Nagoya University of Commerce and
Business
Corresponding: Hiroshi Ito, Faculty of Economics, Nagoya University of Commerce
and Business, 4-4 Sagamine, Komenoki-cho, Nisshin-shi, Aichi 470-0193, Japan
TEL: +81 561 73 2111
Email: hito@nucba.ac.jp

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1. Introduction
In May 2015, UNESCO, UNICEF, the World Bank, UNFPA, UNDP, UN Women, and
UNHCR organized the World Education Form in Incheon, Republic of Korea. Over
1,600 participants from 160 countries adopted the Incheon Declaration for Education
2030 that aims to achieve inclusive and equitable quality education and lifelong
learning for all by 2030 (UNESCO, 2016). This declaration served as a fundamental
tenet for establishing the Sustainable Development Goal (SDG) 4 that aims to ensure
inclusive and equitable quality education and promote lifelong learning opportunities
for all. SDGs were set by the United Nations (UN) during the 2015 UN Assembly.
SDGs consist of 17 global goals1, fourth of which is about quality education for all2.
Despite some progress, many countries are off track to meet these goals. One of
the major obstacles is insufficient funding for education. According to the Education
Commission (2016), there is an external financing need for key education goals in
low-income countries of about US$ 3 trillion annually to 2030 from the current 1.2
trillion USD. In order to mobilize extra financial resources for education,
debt-for-education swaps have been implemented by several governments of developed
1 1) End poverty in all its forms everywhere; 2) End hunger, achieve food security and improved
nutrition and promote sustainable agriculture; 3) Ensure healthy lives and promote well-being for at all
ages; 4) Ensure inclusive and quality education and promote lifelong learning for all; 5) Achieve gender
equality and empower all women and girls; 6) Ensure access to water and sanitation for all; 7) Ensure
access to affordable, reliable, sustainable and modern energy for all; 8) Promote inclusive and sustainable
economic growth, employment, and decent work for all; 9) Build resilient infrastructure, promote
sustainable industrialization, and foster innovation, and infrastructure; 10) Reduce inequality within and
among countries; 11) Make cities inclusive, safe, resilient and sustainable; 12) Ensure sustainable
consumption and production patterns; 13) Take urgent action to combat climate action and its impacts;
14) Conserve and sustainably use the oceans, seas, and marine resources; 15) Sustainably manage forests,
combat desertification, and halt and reserve land degradation and halt biodiversity loss; 16) Promote just,
peaceful, inclusive societies; and 17) Revitalize global partnerships for sustainable development (United
Nations, 2017a).
2 SDG4 is composed of seven different sub-goals as follows: 1) Ensure that all children complete free,
equitable and quality primary and secondary education leading to relevant and effective learning
outcomes; 2) Ensure that all children have access to quality early childhood development, care and
pre-primary education so that they are ready for primary education; 3) Ensure equal access for all women
and men to affordable quality technical vocational and tertiary education, including university; 4)
Substantially increase the number of youth and adults who have relevant skills, including technical and
vocational skills, for employment, decent jobs and entrepreneurship; 5) Eliminate gender disparities in
education and ensure equal access to all levels of education and vocational training for the vulnerable,
including persons with disabilities, indigenous peoples, and children in vulnerable situations; 6) Ensure
that all youth and a substantial proportion of adults achieve literacy and numeracy; and 7) Ensure all
learners acquire knowledge and skills needed to promote sustainable development, through education for
sustainable development and sustainable lifestyles, human rights, gender equality, promotion of a culture
of peace and non-violence, global citizenships, and appreciation of cultural diversity and of culture’s
contribution to sustainable development (UNESCO, 2016).

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nations.
As Buckley (2011) maintains, debt swaps are important funding tools that makes
debt relief politically attractive to donor countries as well as contributes to the
development of recipient countries through cancelling external debt and financing
development projects.
Debt swaps (also called debt conversions) are a type of debt relief, often as part of
the official development assistance (ODA) funding: instead of paying back the debt to
creditor countries, debtor countries use the debt money for their social development,
such as education and health care (Mealla, 2007; Thapa, 1998). Cassimon, Renard, and
Verbeke (2008) define a debt swap as a switch from debt service spending by the public
sector to development spending, made by a cancellation of debt. Fletcher and Webb
(2012) define it as a financing technique to mobilize resources for development in
debtor countries by converting a portion of external debt owed to the creditor country
into funds for new or existing aid programs in the debtor country. The mechanism of
debt swaps is that they make a fiscal space that enables the debtor government to
channel fiscal resources, otherwise devoted to debt servicing, into social development
programs without sacrificing fiscal and macroeconomic sustainability (Heller, 2006).
Debt-for-education swaps are an application of debt swaps for development
(Organización de Estados Iberoamericanos, 2006). According to Cassimon, Essers, and
Renard (2009), debt swaps for education are “the cancellation of external debt in
exchange for the debtor government’s commitment to mobilize domestic resources for
education spending (p.2). UNESCO (2009) defines debt swaps for education as a
“conversion of parts of foreign debt servicing into investment in their education system”
(p. 1).
Given that debt swaps for financing education is a relatively new approach that
has rarely been discussed in educational development literature, only a handful of
experts and/or scholars seem to fully understand its mechanisms. This article describes
debt swaps for development focusing on debt-for-education swaps, explaining how they
became popular as an innovative funding mechanism for funding development, in
particular, education, examining why they have lost momentum, and exploring whether
debt-for-education swaps are a feasible option for funding social development programs
in current and future contexts.

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2. Financial problems of development
The debt of developing countries has been a major concern for their socio-economic
development, with a growing number of problems such as the accumulation of domestic
debt, and short-term debt and unsecured private debt (Culpeper and Kappagoda, 2016).
Debt burdens have negative impacts on debtor countries by diverting public funds away
from social development programs (Fletcher and Webb, 2012; Thapa and Thapa, 2002).
Due to the debt overhang effect from heavy debt burdens, the debtor government is
unable to invest in social development programs as they strive to repay debt (Omotola
and Saliu, 2009). Mealla (2007) suggests that special treatment is required to address
the issues of foreign debt. Using a similar mechanism to the debt swap (Mealla, 2007),
the World Bank and IMF launched an initiative called heavily indebted poor countries
(HIPC) for developing countries not to face a debt burden (IMF, 2000; Nomura, 2011).
HIPC consists of debt relief for the poorest and most indebted countries (low-income
countries) in exchange for social development investment (Mealla, 2007). HIPC
provides debt relief to countries that demonstrate solid governance, and efforts toward
tackling corruption and poverty so that they can invest in health and education for
societies (Omotola and Saliu, 2009). Since 2000, 27 countries have accepted the HIPC
initiative and increased their social spending to cover basic social needs, including
education, from 6.4% of the gross national product to 7.9% in 2003. In 2005, as a
successor of HIPC, the Multilateral Debt Relief Initiative was adopted by the World
Bank, IMF, and the African Development Bank. This initiative called for the
cancellation of the debt issued by these banks (IMF, 2017). However, this debt relief
mechanism reached few countries and the amount of debt relief was small (Mealla,
2007). Even after the very aggressive debt-relief activities in the 1990s and the 2000s,
African countries still undertake annual debt repayment of $20 billion (Omotola and
Saliu, 2009).
Financial problems of education
The Education 2030 Agenda and SDG 4 aim to increase access to learning opportunities
for all throughout their lifetimes and places great pressure on the public funding of
education (UNESCO, 2006). The Education 2030 Framework for Action, set during the

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2015 World Education Forum, indicates that the shortage of funds should not endanger
the provision of educational opportunities for all. The annual financial gap between
available domestic resources and the funding necessary to meet SDG 4 in low and
lower-middle income countries is even more serious than it was during the 2000-2015
Education for All (EFA) agenda (UNESCO, 2016).
Regmi (2016) notes that as of 2015, there were 48 countries in the category of
least developed countries that are considered highly vulnerable to economic and
environmental shocks and have low levels of human assets (United Nations, 2018).
They account for 12% of the world population but share 1% of the overall global wealth.
The average external debt of these countries between 2005 and 2013 was 28.1% of their
gross national income. To make matters worse, non-concessional loans for education
have increased significantly at a rate above the growth of grants since 2009 (UNESCO
2015). Nomura (2011) argues that many sub-Saharan African countries find it very
difficult to seek public funding for education due to macroeconomic instability, high
debt ratios, poor tax administration, and large informal sectors. Filmus and Serrani
(2009) note that external debt of developing countries is a serious obstacle for
investment in education.
3. Debt swaps for development
As already mentioned, debt swaps for development are a type of instrument for debt
relief. Developing countries have traditionally been indebted. To alleviate their debt
burden, debt relief was elaborated on and practiced as early as the 1950s. The concept
of debt swaps in exchange for various debtor commitments to development was became
popular at the end of the 1980s when the Paris Club, a group of major creditor countries,
discussed debt servicing problems and negotiated debt restructurings between indebted
countries and their bilateral creditors (Cassimon, Renard, and Verbeke, 2008). Since
then, debt swaps have been actively practiced as a means to reduce debt burden in
developing countries. Some members of the Paris Club such as France and Germany
have carried out debt swaps to generate additional resources for education in developing
countries (UNESCO, 2011), as will be described shortly.
Debt Swaps for education

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Excessive obligations to repay debt may discourage government from spending for
social development, including education. As Filmus and Serrani (2009) note, the
problems of low education investment and over-indebtedness mutually complement
each other. Debt relief interventions, such as debt-for-education swaps, could resolve
this issue and help restore economic growth (Cassimon, Essers, and Renard, 2011).
At the 32nd UNESCO General Conference in 2003, the application of debt swaps
for financing education was considered for the first time. The Ministers of Education of
Argentina and Brazil urged UNESCO to take world-wide initiatives to implement debt
swap programs (Mealla 2007). The Ministers of Education of Argentina, Brazil, and
Venezuela as well as the President of Peru then requested the creation of a Working
Group on Debt Swaps for Education during UNESCO’s 33rd General Conference held
in 2005 (Cassimon, Essers, and Renard, 2009).
In 2006, the Working Group on Debt Swaps for Education was established in
accordance with the Resolution of UNESCO’s 33rd General Conference. The first
meeting of the Working Group was held in Paris in 2006. The meeting resulted in the
establishment of a basic conceptual framework, an exchange of experiences, and a work
plan. The results from this meeting were presented to the 34th session of UNESCO’s
General Conference in 2007 (Cassimon, Essers, and Renard, 2009). The second meeting
of the Working Group was held in Buenos Aires in 2007. Key concepts and models,
lessons learned from debt swap experiences, guidelines on best practices and
recommendations were submitted to the UNESCO’s Director General (Cassimon,
Essers, and Renard, 2009). The setup of a Special Account to pool funding for activities
related to debt-for-education swaps (i.e., a pilot study) was also requested during the
35th session of UNESCO’s General Conference in 2009 (UNESCO, 2013).
Subsequently, the Task Force on Innovative Financing for Education was
established by the Leading Group on Innovative Financing for Development in 2010.
UNESCO was assigned to explore the feasibility of debt swaps for education (UNESCO,
2010). Also, under the Resolution of UNESCO’s 35th General Conference in 2009, the
Advisory Panel of Experts on Debt Swaps and Innovative Approaches to Education
Financing was established by UNESCO in 2010 (UNESCO, 2013).
The purpose of the Advisory Panel was examining how to improve funding
mechanisms for education. UNESCO would use extra-budgetary funds provided from

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the Open Society Institute (OSI), a philanthropy NPO founded by George Soros, to
conduct a pilot study to explore two topics: (i) how debt swaps have been used more
effectively to provide funding for education and (ii) how debt swaps can be combined
with other financial instruments to spare more funds for education. Findings from the
study suggested using debt swaps to support issuing domestic bonds and explained how
these Debt Conversion Development Bonds (DCDBs) could be used/applied to help fill
the gap in funding needed to achieve EFA and education-related Millennium
Development Goals. The Advisory Panel recommended undertaking a pilot feasibility
program to test the DCDBs in a given country. This program might then be replicated in
more countries (UNESCO, 2013).
As recommended by the Advisory Panel in 2012, UNESCO conducted a
feasibility study to identify a debtor country and a creditor country for piloting a DCDB
program. Although potential debtor countries and a creditor country were identified
based on consultations with a number of stakeholders (including debtor and creditor
countries, Global Partnership for Education, IMF, OSI, and UN agencies), no creditor
country has committed to participating in a DCDB pilot project (UNESCO, 2013). To
date, no contribution has been received to the aforesaid Special Account for
debt-for-education swaps (UNESCO, 2013). Possible reasons why creditor countries
have not made any contribution will be explored later.
4. Country cases:
Despite the recent impasse in debt-for-education swaps, particularly in the form of
DCDBs, there were several examples of similar debt-for-education swaps that were
considered successful, in particular during the mid-2000s. This section presents and
discusses cases of debt swaps enacted between El Salvador and Spain in 2005, France
and Cameroon in 2006, and Germany and Indonesia in 2006 to further explore how
these exchanges might be used for funding education initiatives.
Case between El Salvador and Spain: The Rural School Construction Program (2005)
In December 2005, Spain and El Salvador agreed to convert debt owed by El Salvador
to Spain into funds for education. The swap involved a number of education-related

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programs to address the issue of regional disparities in achieving EFA. To support this
action, Spain contributed 10 million USD over four years in the form of debt swaps to
the construction of rural schools and the purchase of educational textbooks (UNESCO,
2011). Under this agreement, instead of making repayments to Spain, the Ministry of
Finance of El Salvador deposited funds into a special account at the El Salvador’s
Central Bank (Cassimon, Prowse, and Essers, 2011). Spain then canceled 10 million
USD worth of debt owed to them by El Salvador.
The deposited funds were managed through two coordinated committees with
representatives of Spain and El Salvador. The first committee implemented the overall
debt swap and formulated the execution strategy. The second committee, the Technical
Committee, disbursed funds and implemented the projects associated with the funds
(Cassimon, Prowse, and Essers, 2011; UNESCO, 2011).
The Rural School Construction program supported by debt swaps was largely
considered positive by relevant stakeholders in Spain and El Salvador. From Spain’s
point of view, debt swaps were able to support projects without conventional ODA
funding. From El Salvador’s perspective, the funds that would have been used to repay
debts were returned to the country and funded its own education projects.
Nonetheless, the impact of the debt swaps was also questioned. One notable
problem was the small scale of the program: 10 million USD is not enough to tackle
education issues in the country. For example, improved roads and additional school
buses are necessary for children to travel to and from school safely. El Salvador has
over 600 million USD bilateral debt that could be used for debt swaps, but donor
nations are unwilling to pursue large debt swaps with lower-middle income countries
like El Salvador (Cassimon, Prowse, and Essers, 2011; UNESCO, 2011).
Case between Cameroon and France: The Contract Teacher Program (2006)
In 2000, France agreed to work with other Paris Club members to reduce debt by
cancelling loan repayments through debt swaps. As a means to ensure additional debt
relief to be converted into investments in education, France decided to create the
Contrat de Désendettement et Développement (C2D: Contracts for Debt Relief and
Development). In 2006, France signed an agreement with Cameroon for 1.17 billion
Euros of debt to be diverted to education programs in Cameroon (UNESCO, 2011).

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In the same year, Cameroon designed its education strategy focusing on universal
primary enrollment, gender equity, and 100% completion rates to be reached by 2015.
To achieve these goals, the government prioritized the recruitment of contract teachers.
The contract teacher program called for the recruitment of 37,200 contract teachers, to
be funded with 392 million USD over five years. While the government expected to
support nearly 75% of the total cost of the program, a financing gap existed of 103
million USD. To fill some of this gap, the C2D program provided 55.3 million USD
(UNESCO, 2011).
C2D was generally considered a successful program by relative constituents in
both France and Cameroon. From the perspective of France, C2D can support projects
without conventional ODA funding. Through frequent communications with the
Cameroon government, the French government alleviated concerns about corruption
and inappropriate use of budget funds released as a result of debt relief. From
Cameroon’s point of view, the funds generated by debt swaps were used to finance its
own poverty reduction strategy.
However, the C2D program has been criticized for a number of reasons. OECD,
for example, criticized C2D for the high costs associated with its complex
administration (OECD, 2006). The main factor contributing to these administration
costs is the number of conditions and requirements necessary to ensure that the funds
are properly used for development. Given Cameroon’s history for being notorious for
corruption (Transparency International, 2006), French officials retained some control
and visibility for the transparency of funding use.
Case between Germany and Indonesia
In 2000, Germany and Indonesia agreed to make a debt-for-education swap
arrangement for the first time. Under this agreement, Germany would cancel a bilateral
debt of 25.6 million Euros and Indonesia would spend the local currency equivalent of
half of this amount over three years on teacher training between 2003 and 2005.
A second debt-for-education swap was agreed in October 2002. The swap
included 23 million Euros of bilateral debt. The conversion rate was 50%, and the
Indonesian government promised to invest in the construction of 100 new junior
secondary schools in the remote Eastern provinces between 2005 and 2007. To rebuild

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the Indonesian schools damaged by the earthquake in Yogyakarta and Central Java in
2006, a third swap of 20 million Euros was transacted (Cassimon, Essers, and Fauzi,
2014; Cassimon, Essers, and Renard, 2011). There was a positive result of the debt
swaps such as the (apparent) budgetary gains in the education sector (Cassimon, Essers,
and Renard, 2011).
Although this case between Germany and Indonesia is generally considered
successful, their budgetary gains are more modest than expected. Cassimon, Renard, and
Verbeke (2008) argue that ‘budgetary gains (additional amount in the national budget for
social development activities such as education and health care) from debt relief only
gradually materialize over time (many years or even decades), whereas counterpart
payments, on the other hand, may be due much earlier, typically within the first few years”
(p. 1189). Given the German-Indonesian debt-for-education swaps with a long-term
original repayment schedule, the impact of this debt swap was small.
5. Limitations and Issues
Debt swaps are aimed at reducing the debt of developing countries and releasing
resources for social development. However, this is a very simple representation of debt
swaps, and several issues need to be considered.
First, depending on the contractual repayment and schedule of the underlying
debt, budgetary gains from debt swaps are realized only slowly, typically over many
years or even decades (Cassimon, Essers, and Renard, 2009). Second, if indebted
countries are financially strained, which is often the case, perhaps indebted countries are
unable to pay back the debt in the first place. Therefore, the use of the debt for social
development might be unrealistic and impractical proposition. Third, debtor countries’
fungibility is also a concern (debtor countries put the money generated by debt swaps
on the government budget). If a debtor country originally allocate 100 million USD for
education, and if additional 100 million was generated by debt swaps, instead of adding
the 100 million USD to make the budget 200 million USD, the debtor government
might use the additional 100 million USD for education as the original budget. Fourth,
even if debts are converted into funds, debtor governments will not necessarily use
these resources for social development, including education. Consequently, donors tend
to control to a certain degree how the funds from debt swaps are spent (Cassimon,

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Renard, and Verbeke, 2008). However, too much donor interventions may reduce the
autonomy of the debtor country over development projects (Cassimon, Essers, and
Renard, 2011). Fifth, debts are often converted and managed as bonds. For instance, a
NGO buys debt from the debtor government in the form of bonds and conducts
development projects with funds from the interests of the bond. In this case, only
social-oriented investors such as NGOs would invest in them (Cassimon, Renard, and
Verbeke, 2008). Sixth, the amount of debt swap is too insignificant to create any indirect
(positive) economic effect. One cannot expect the debt scenario to benefit from this
piecemeal transaction (Cassimon, Prowse, and Essers, 2011).
6. Discussion
We have so far explained what debt swaps for development are, focusing on those for
education, and how debt-for-education swaps have been used by looking at cases
between El Salvador and Spain, Cameroon and France, and Indonesia and Germany. As
these cases partially suggest, whereas debt-for-development swaps in general were
popular from the end of 1980s to the 2000s, debt-for-education swaps were particularly
popular in the mid-2000s arguably because education was a top priority on the
international development agenda after the World Education Forum in Dakar in 2000
(Ito, 2012). Since the beginning of the 2010s, however, there do not appear to have been
many debt-for-education swap practices (The Guardian, 2014). Although there have
been sporadic cases on debt-for-development swaps such as the one between Italy and
Albania (2012-2016) and the one between Russia and Mozambique (2017-2021), as far
as the authors know, few debts have recently swapped for education purposes. Also,
UNESCO’s efforts to take a worldwide initiative for debt-for-education swaps and
create a Special Account to pool financial contributions related to debt swaps ended up
in vain, as no creditor was engaged in debt swaps in this context.
One major reason of the recent absence of debt-for-development swaps, in
particular that of education, may be attributed to the 2008 Lehman Shock and the
subsequent global financial crisis. Developed nations, also creditor countries, such as
the US, EU, and Japan suffered from the crisis and could not afford to carry out debt
relief practices, including debt swaps for development, as they could before.
Developing countries, also debtor countries, have also been strongly affected both by

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the spillovers from the crisis (e.g., less trade) and policy responses (e.g., fewer debt
swaps for development) from creditor countries. However, for a large majority of
developing countries, “the spillovers from the crisis have not been all that negative”
(Akyüz, 2014, p. 3). Indeed, according to the analysis from Jubilee Debt Campaign
based on IMF and World Bank databases, the average government external debt
payment in 126 developing countries have increased from 6.7% of government revenue
in 2014 to 10.7% in 2017, an increase of 60% (Public Finance International, 2018). This
implies that many developing countries are successfully reducing their overall debt
burden.
Nonetheless, recent economic recovery and growth has been strengthening and
firmer in developed countries (United Nations, 2017b). In many emerging economies,
in contrast, the corporate sector remains vulnerable to sudden changes in financial
condition and destabilizing capital outflows, and in four major developing regions (i.e.,
West Africa, Central Africa, Southern Africa, and Latin America and the Caribbean),
GDP per capita declined in 2016 (United Nations, 2017b). Given that many developed
nations have experienced stable economic recovery and growth in the recent years while
developing nations struggle with large amount of debt and fragility of their economic
systems, it is possible that debt swaps for development, including education, will
become popular again. For instance, according to Devex (2017), the World Food
Program mediated a debt swap deal between Russia and Mozambique. Russia agreed to
waive Mozambique’s public debt, releasing 40 million USD that the Mozambican
government has committed to the WFP to implement a school meal program for
150,000 children between 2017 and 2021. Italy also has been engaged in the Debt for
Development Swap Program with Albania. Between 2012 and 2016, Italy helped
promote social development initiatives of Albania including education related activities,
with a total financial contribution of 20 million Euros. Italy has continued to help this
program, as of 2018 (Italian-Albanian Debt for Development SWAP Agreement, 2016).
These recent, albeit few, practices of debt-for-development swaps may suggest their
revival in the near future. As cases examined in this article suggest, however, it is
important to keep it in mind that debt-for-development swaps, including education,
function only with a number of conditions such that the swap size should be large
enough to make impact on macro-economy of the debtor country, and creditor countries
should monitor how the funding is spent while respecting the autonomy and ownership

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of debtor countries in development projects. This article therefore argues that
debt-for-development swaps might be an infeasible option to fund education unless
these issues are addressed.
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Public interest statement
Education is in danger because there is not enough money available to invest in it. New
funding systems to fund money have been sought. The new system was created and
called debt swaps for education. Because it can cancel the past debt and use the money
to use for education, it was once considered a magic bullet to work out all education
problems related to money. However, debt swaps for education is no longer popular.
Why? This paper tries to find out possible reasons, talking about positive and negative
aspects of the system. This paper proposes that the system can still be useful but with a
lot of conditions.

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Dr. Hiroshi Ito is a Professor at the NUCB Business School.
Before coming to NUCB, he had worked as an education expert
for UNESCO in Paris, France. He also worked for UNICEF (the
Philippines), JICA (Ecuador & Paraguay), an NGO (Guatemala),
and an educational service company (USA). Dr. Ito received his
M.A. from Columbia University, his Ph. D. from University of
California, Los Angeles (UCLA), and his MBA from Université
Paris I Panthéon-Sorbonne.
Professor Ryosuke Sekiguchi is a Professor at the Nagoya
University of Commerce and Business. He specializes in
accounting. His research interests lie in cash flow accounting and
nonprofit accounting. He received his MA in Accounting from
Keio University.
Dr. Toshiyuki Yamawake is an Associate Professor in Economics
at the Nagoya University of Commerce and Business. He
specializes in financial engineering. His research focuses on the
evaluation of value measure and risk measure. Dr. Yamawake
received his Ph.D. in Economics from Kyoto University.