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$150 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$531 million 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$100 million from the IDB and US$50 million from The Nature Conservancy.

Doherty-Bigara said while such deals usually sounded good at the point of signing, it was what happened over the lifetime of the deal that really mattered.

“Right now, Barbados has committed to a couple of milestones that are the support, the framework behind these transactions,” she said during the Central Bank of Barbados 43rd annual review seminar on Monday. Doherty-Bigara explained that while ministries of finance were more concerned about building sustainability around a debt management strategy, ministries of environment were often concerned about attaining goals.

However, she warned that it was important for authorities to understand how to align the needs of everyone to ensure the commitments and requirements of deals are met.

Speaking specifically to the debt-for-nature swap, Doherty-Bigara said, “The credibility of these transactions are 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.”

She said it was therefore critical that the island’s credibility was protected in the current deal, especially if there were plans to attempt a similar deal in the future.

“So that’s where the IDB has a technical cooperation, a grant, with the coastal Zone Management Unit who is leading on the marine spatial planning process which was the first target they had to achieve during the first year of the transaction,” Doherty-Bigara disclosed, adding that the IDB would continue to support the Government through the provision of technical support so that the targets can be achieved.

She said the international financial institution was also working with the Ministry of Environment to build institutional capacity to ensure effective collection and verification of data, monitoring and reporting. (MM) ]]>