Paris Club agreements may contain a debt swap provision. It enables creditor countries to undertake debt swaps on a bilateral and voluntary basis. These operations may be debt for nature, debt for aid, debt for equity swaps or other local currency debt swaps. These swaps often involve the sale of the debt by the creditor government to an investor who in turn sells the debt to the debtor government in return for shares in a local company or for local currency to be used in projects in the debtor country.
In order to preserve comparability of treatment and solidarity among creditors, the amounts of debt swaps that can be conducted are capped at a certain percentage of the claims of each individual creditor.
The terms under which these operations can take place are contained in the standard terms of treatment. To ensure full transparency between creditors, debtors and creditors submit a report to the Paris Club Secretariat containing details of any transactions undertaken.
