Angola received formal approval from the World Bank and its Multilateral Investment Guarantee Agency for crucial financial guarantees that will underpin a "debt-for-education" swap the country is lining up to pay for new schools.

Debt swaps aim to reduce interest payments so governments can spend more in key areas, and Angola's is set to be only the second that the World Bank has backed after its first just over a year ago in the Côte d'Ivoire.

Angola's government is set to buy back up to $400 million of its most expensive commercial debt using a much lower-cost new loan, thanks to two World Bank and MIGA 'guarantees' that cover the repayments if any problems arise.

The financial savings it makes will then be used to build new schools and fund other improvements in education.

Human capital development

"This operation demonstrates the power of the Guarantee Platform for both liability management and human capital development," Muhamet Bamba Fall, MIGA's Director for Industries, said.

The World Bank also approved a separate $750 million "development policy loan". Angola is expected to spend that money on the development of the Lobito Corridor, a key initiative linking Zambia and the Democratic Republic of Congo's mining hubs to Angola's Lobito port.

With rich governments cutting official development aid and many countries grappling with their debts, nations are turning to creative ways, such as debt swaps to fund projects ranging from protecting coral reefs to paying for schools as in Angola's case.

Having waited on the sidelines until its Côte d'Ivoire swap in 2024, which also targets school building, the World Bank now says it has a sizeable pipeline of deals planned.

Angola has also said recently that it is planning a debt-for-health swap, although it is yet to say who will provide the all-important credit guarantees.