IRC Calls on Multilateral Development Banks and Development Finance Institutions to Deploy Credit Guarantees to Help Unlock Humanitarian Debt Swaps in Fragile Contexts

New York, NY, June 24, 2026 - The International Rescue Committee (IRC) today published Closing the Humanitarian Financing Gap: Rethinking Debt Swaps in Fragile Contexts, a white paper laying out a concrete roadmap for using debt swaps to fund humanitarian response in fragile and conflict-affected states. The paper calls on multilateral development banks, development finance institutions, and governments to take specific steps to make that possible, particularly by expanding the use of partial credit guarantees, political risk insurance, and other forms of credit enhancement to support debt swap transactions.

The paper arrives at a moment of acute financing crisis. International humanitarian assistance fell to $12 billion in 2025 against a global appeal of $44 billion - the lowest funding rate in a decade - while 239 million people require humanitarian assistance globally. The share of Overseas Development Assistance (ODA) received by fragile and conflict-affected states is declining, falling to 25% compared to 43% more than a decade ago. At the same time, developing countries paid a record $921 billion in interest payments in 2024, and more than 3.4 billion people now live in countries that spend more on interest payments than on health or education. In countries like Pakistan, Nigeria, and Ethiopia, debt service obligations and humanitarian response increasingly compete for the same scarce resources.

Debt swaps convert a portion of a country's debt obligations into commitments toward social or humanitarian outcomes, freeing fiscal space without depending on new aid flows. Since 1987, 169 such transactions across 45 countries have mobilised over $3 billion - almost exclusively for conservation and development goals. The IRC argues the time has come to extend this proven mechanism to humanitarian financing, and that the institutions capable of enabling it must treat the current moment as an imperative to act. The paper also emphasises the role of humanitarian organisations in helping shape use-of-proceeds arrangements, ensuring savings reach crisis-affected communities and align with government priorities, while reducing perceived risks. While debt swaps are not a silver bullet - they require the right debt profile, government commitment, and credible safeguards for how savings are used - they can help turn debt pressures into sustained resources for crisis-affected communities where the enabling conditions exist.

The IRC's central recommendation is a blended guarantee model that can enable the first generation of humanitarian debt swaps: layering partial credit guarantees from multilateral development banks alongside political risk insurance from development finance institutions, participation from private insurers, and first-loss capital from donors and philanthropies. By distributing risk across institutions, this structure can make transactions viable in fragile contexts where no single guarantor is able to provide full exposure.

The paper sets out six concrete steps to make humanitarian debt swaps a reality:

• Multilateral development banks should extend their guarantee tools and country-level policy engagement to cover humanitarian applications in fragile and crisis-affected settings, where debt swaps can strengthen fiscal sustainability and support core development outcomes such as health, education and protection. The World Bank - as the largest multilateral creditor for low- and middle-income countries and anchor of the newly launched Global Hub on Debt for Development Swaps - has a particularly important role in shaping the risk frameworks and providing the partial guarantee layers needed to make these transactions viable.
• Bilateral development finance institutions should develop joint risk-sharing frameworks and expand their mandates to cover provision of political risk insurance and guarantees for debt swap transactions
• Donor governments and philanthropic actors should provide first-loss capital and transaction cost funding that makes early deals viable, and use their influence over MDB and DFI governance to build institutional appetite for these transactions.
• Countries with sufficient commercial debt, government commitment and humanitarian presence should be supported in pursuing initial swap transactions, with early cases used to develop the evidence base and pathways for wider use in fragile contexts.
• Creditor governments should use their influence with MDBs and DFIs to encourage greater use of guarantee tools for humanitarian debt swaps. They should also expand bilateral swaps where market-based structures are less suitable, converting debt obligations into agreed investments in social and humanitarian priorities.
• Humanitarian organisations can help design and govern use-of-proceeds mechanisms, develop credible programme pipelines, and independently monitor that savings reach affected populations - reducing implementation risk and strengthening the case for guarantee provision.