Overview

Kofi Annan, former Secretary-General of the UN and Chair of the Replenishment Conference of the Global Fund giving a speech in September 2007 in Berlin. Annan is the father of the idea to use debt swaps to raise resources for the Global Fund.

Many supporters of the global fight against HIV/AIDS, tuberculosis and malaria – aware of the demand and the remaining funding gaps - are keen to explore possible ways to increase their financial commitment to global health. Innovative financing mechanisms provide one means of augmenting, diversifying and complementing financial support to the Global Fund provided through the voluntary replenishment mechanism.

The Debt2Health initiative was approved by the Board of the Global Fund in April 2007. A combination of high debt and disease burdens faced by a number of countries in the Global Fund's portfolio led to a simple yet ingenious idea. Debt2Health uses debt swaps to free up domestic resources that can be invested in approved Global Fund programs.

Debt2Health is a partnership between creditors and grant recipient countries in which the Global Fund facilitates a three-party agreement. Under this agreement, creditors forgo repayment of a portion of their claims on the condition that the beneficiary country invests an agreed-upon counterpart amount in health through Global Fund-approved programs. The counterpart payment can be a one-time payment or instalments that correspond to the debt service payments. The Global Fund then disburses the counterpart funds through the same systems and on the same principles as it does to regular grants.

For the first time, debt swaps are being carried out through trilateral arrangements involving a multilateral organization, thus enhancing aid harmonization and implementing the Paris Declaration on Aid Effectiveness. Through the counterpart payments the beneficiary country becomes a donor to the Global Fund. This strengthens ownership and local participation.

Germany was the first creditor to join Debt2Health with a commitment of US$ 290.2 million for 2008-2010. The first three-party Debt2Health Agreement was signed between Germany, Indonesia and the Global Fund for the conversion of US$ 72.6 million, which will be used for urgent and lifesaving investments in HIV-services and public health interventions in Indonesia. Talks are on-going with additional creditors.