a. Main Principles of Debt Rescheduling (5 Marks)

1. Extension of Maturity Period: Rescheduling typically involves extending the period over which the debt must be repaid, providing the debtor with more time to meet their obligations. This can reduce the immediate financial burden.
2. Adjustment of Interest Rates: Interest rates may be reduced to lower the cost of servicing the debt. This is often negotiated to ensure that the borrower can afford the repayments under the new terms.

b. Forms of Debt Conversion (10 Marks)

1. Debt-for-Equity Swaps: This involves the conversion of debt into equity, where the creditor becomes a shareholder in the debtor’s organization instead of receiving repayment in cash.
2. Debt-for-Nature Swaps: In this case, part of a country’s foreign debt is forgiven in exchange for commitments to invest in environmental conservation projects.
3. Debt-for-Export Swaps: This arrangement allows the debtor to repay their obligations through the export of goods rather than in cash, often used in international trade agreements.
4. Debt-for-Bond Swaps: Debts are converted into bonds, which can then be traded in the financial markets. This provides liquidity to the creditor and reduces the debtor’s immediate repayment obligations.
5. Debt-for-Development Swaps: Here, creditors agree to reduce the debt burden in exchange for the debtor country investing in specific developmental projects, such as education or healthcare.