Barbados has made history by executing the world’s first debt-for-climate-resilience swap, a groundbreaking initiative aimed at combating climate change while addressing national debt challenges.
Through this innovative plan, Barbados converts its national debt into biodiversity conservation efforts, collaborating with the Inter-American Development Bank, the Green Climate Fund, and several regional banks.
The island nation is grappling with a severe water crisis, where available water resources are four times lower than the global average, putting immense strain on agriculture and daily consumption.
To facilitate the swap, Barbados repurchased $293.3 million of its national debt using a sustainability-linked loan and refinanced with the Inter-American Development Bank and the European Investment Bank, each contributing $150 million.
The loan agreement includes sustainability targets, and failure to meet these will result in financial penalties for the government, ensuring commitment to environmental goals.
The refinancing has generated $125 million in savings, which will fund crucial upgrades to the island’s water and sewage treatment infrastructure, including the New South Coast Water Reclamation and Reuse Facility, projected to more than double the water supply by 2050.
Additional funds will bolster food security and environmental protection initiatives, setting a precedent for other nations to adopt similar climate financing strategies.
Reference(s):
Barbados leads with world’s first debt swap for climate initiatives
cgtn.com
