IDB Official Says Meeting Goals Under Debt-For-Nature Deal Crucial To Protecting Barbados’ Credibility

  • Barbados faces the possibility of incurring penalties and a blow to its credibility should it not meet targets associated with its recent debt-for-nature swap arrangement.
  • This warning has come from Jennifer Doherty-Bigara, Senior Climate Change Specialist with the Inter-American Development Bank (IDB) which is one of the policy-based guarantors behind the US$150Mn blue loan debt-for-nature arrangement which was finalised last September.
  • The debt conversion deal allowed Barbados to buy back a portion of its US$531Mn bonds due in 2029 and 2043 (Eurobonds and Series E bonds) at a lower interest rate. This comes with repayment guarantees of up to US$100Mn from the IDB and US$50Mn from The Nature Conservancy.
  • Doherty-Bigara said while such deals usually sound good at the point of signing, it is what happens over the lifetime of the deal that matters. Currently, Barbados has committed to a couple of milestones that are the framework behind these transactions. While ministries of finance are more concerned about building sustainability around a debt management strategy, the ministries of environment are often more interested in attaining climate goals. However, it is important for all authorities to understand how to align the needs of everyone to ensure the commitments and requirements of deals are met.
  • Doherty-Bigara noted that, “The credibility of these transactions is set over time. If Barbados starts missing the different commitments, there will be penalties, but also the loss of credibility. Barbados may want to go back to the market with similar financial instruments but if they start lacking with the current instruments they use they won’t be able to find that credibility back.” 
  • It is therefore critical that the island’s credibility is protected in the current deal, especially if there are plans to attempt a similar deal in the future. Currently, the IDB is working with the Coastal Zone Management Unit on the marine spatial planning process which was the first target for Barbados to achieve during the first year of the transaction and has promised to continue working with the Ministry of Environment to build institutional capacity to ensure effective collection and verification of data, monitoring and reporting.

(Source: Barbados Today)