C2Ds | Debt Reduction-Development Contracts
Debt Reduction-Development Contracts (C2Ds) are a mechanism within the French foreign aid tool-set. The mechanism aims to alleviate debt that has been contracted by a developing country within the framework of Official Development Assistance (ODA), e.g. French foreign aid. The C2D mechanism is part of what’s known as the HIPC, or Heavily Indebted Poor Countries Initiative, which is a multilateral programme to reduce the debt burden of certain countries.
C2Ds allow French ODA debts to be refinanced through grants. With the C2D mechanism, a country continues to honour its debt to France; when a repayment is made, France makes a grant to the country in an equivalent amount. The grant money is then allocated to poverty reduction programs that have been selected by joint agreement between France and the receiving country. In this way, the country has funds to pay its debt and funds to continue its development, rather than seeing a large part of its meager budget going simply to debt service.
Through C2Ds, France is able to have a more meaningful dialogue with the authorities in recipient countries about their poverty reduction strategy, and more accountability to the French Parliament regarding the use of foreign aid funding.
C2D debt refinancing is an additional means to cancel out debt within the framework of the Paris Club agreement. The debt reduction is long-term: the original loan maturities are often spread over a period of twenty years, so several consecutive C2Ds are contracted, each for a three to five year period.
In application of the Inter-ministerial Committee for International Cooperation and Development directives, the general orientation of C2Ds comes under both the Directorate General for the Treasury and Economic Policy and the Directorate General for International Cooperation and Development. AFD is responsible for processing and implementing C2Ds in the Priority Solidarity Zone countries.
Priority Solidarity Zone Countries
- Sierra Leone
- Sao Tome
- Côte d'Ivoire
>> Implementation of the first C2D in Cameroon: Combating poverty and fostering sustainable economic growth (downloadable brochure - French version only)