Debt2Ed

Debt2Ed is an innovative finance tool that transforms a partner country’s debt into new and additional resources for education to enable system transformation and mobilize further grant funding from the GPE Multiplier

Debt2Ed transforms debt service into investments in education. This lowers the cost of borrowing for countries that implement Debt2Ed transactions and enables more and better spending to get every child in school and learning.

Benefits

  • Partner countries benefit from a lower debt stock and/or debt service payments and increased resources to invest in education.
  • Creditors create a new channel to support international spending on education, helping to meet SDG 4 as well as their own official development assistance (ODA) targets.
  • The education sector gains new investment through or alongside GPE-supported programs.
  • GPE ensures that resources invested this way support transformational change for the partner country’s education system.

How it works

All countries and territories eligible for GPE support in 2021–2025 can access Debt2Ed.

To provide flexibility to partner countries, there are two approaches: a debt swap or a loan buy-down.

In a debt swap, the creditor and partner country agree to a debt treatment that reduces the debt service payments of an existing loan if the partner country commits to invest new and additional resources in its education sector.

GPE will work with the partner country and creditor to determine the best way to channel and monitor the payments to the education sector. These could be through the GPE Fund, or through the partner’s accounts.

In a loan buy-down, the creditor—or a third party—pays some or all a loan’s interest and/or the principal on behalf of the partner country, the ultimate borrower. Depending on the setting, the participants might choose to make the buy-down conditional on mutually agreed targets such as achieving better results in access to education, or implementing policy reforms.

By agreeing to a debt treatment, donors and partner countries can immediately mobilize supplemental funding from the GPE Multiplier, an innovative finance instrument that can work alongside Debt2Ed to unlock specific bottlenecks to system transformation. Resources from the GPE Multiplier can be disbursed when a debt treatment is agreed—potentially before the resources from the debt treatment itself are disbursed.

General resources: