Introduction

The "Kenya-Italy Debt for Development Programme (KIDDP)" aims at converting eligible Official Development Assistance (ODA) bilateral debt owed by the Kenyan Government to the Italian Government into financial resources to implement development projects (debt for development swap operations).

The Agreement, signed in October 2006 between the Italian and Kenyan Governments, provides for a total amount of 44 million Euros for swap operations over a period of ten years. Each annual instalment, equal to one tenth of the overall amount, is deposited into an ad hoc Counterpart Fund at the Central Bank of Kenya.

Debt swap operations are regulated by Italian law no. 449/1997 and law 209/2000, with the aim of supporting debtor nations in their effort to fight poverty, protect the environment and promote human development.

The amount of Kenyan debt eligible for debt conversion belongs to two quotes of public debt already rescheduled and consolidated in the framework of two "Club de Paris" initiatives:
- June 14 2001: bilateral agreement on debt consolidation between Italy and Kenya following the Club de Paris session on November 15 2000 when it was established as a debt treatment ad hoc.

- October 25 2004: bilateral agreement on debt consolidation between Italy and Kenya following a Club de Paris session on January 15 2004 (treatment according to the Huston Terms).

The activity of debt cancellation is managed by the Paris Club, an informal group of official creditors whose role is to find co-ordinated and sustainable solutions to the payment difficulties experienced by debtor nations. Paris Club creditors agree to rescheduling debts due to them.

Furthermore Paris Club agreements may contain a provision which makes it possible for creditors to voluntarily undertake debt swaps. These operations may be debt for nature, debt for aid, debt for equity swaps or other local currency debt swaps.

The swaps often involve the sale of the debt by the creditor government to an investor who in turn sells the debt to the debtor government in return for shares in a local company or for local currency to be used in projects in the country.