Prime Minister Mia Mottley is advocating for an agreement that would enable Small Island Developing States (SIDS) to temporarily halt debt repayments in the aftermath of a disaster or crisis.
The Prime Minister made these remarks during the inauguration of the Barbados Pavilion at the ongoing 28th edition of the Conference of the Parties (COP) in Dubai, United Arab Emirates (UAE).
COP is an annual United Nations (UN) climate meeting where governments discuss strategies to mitigate and prepare for future climate change.
In her address to the gathering, PM Mottley emphasised the urgency of the situation, stating, “We are already in the midst of a crisis,” and called for a global understanding to suspend debt repayments when crises hit SIDS.
Barbados could potentially unlock around 20 per cent of its Gross Domestic Product (GDP) within two years through such an arrangement, according to Mottley.
She asserted, “This is the most far-reaching instrument to give countries fiscal room,” highlighting the significance of the proposal.
Acknowledging the World Bank’s support, PM Mottley commended its President, Ajay Banga, for recognising the needs of SIDS, stating that “the debt pause clauses would be used for existing financial instruments that the World Bank has provided, [giving] immediate relief to people.”
Mottley further explained the concept of debt-for-nature swaps and debt-for-claim swaps, stressing the redirected benefits toward initiatives like the Barbados Marine Trust for environmental protection.
The World Bank’s involvement has already released between US$50-60 million over 15 years, demonstrating the tangible impact of this approach.
The Prime Minister announced plans for a debt-for-climate swap this year, involving collaborations with institutions such as the Inter-American Development Bank, the European Investment Bank, and the Green Climate Fund.
This initiative, Mottley said, is aimed at repurchasing US$300 million of debt to fund a crucial sewage treatment plant for the people and businesses of Barbados, particularly on the South Coast.
Addressing the increasing uninsurance and under-insurance in the Caribbean region due to high premiums and escalating climate-related incidents, Mottley pointed to the urgent need for fiscal resources to safeguard families and businesses from the adverse effects of the climate crisis.
PM Mottley underscored the unique challenges faced by SIDS, such as high exposure to natural disasters, climate change, global economic shocks, and limited resources for resilient development.
These challenges, she argued, hinder their growth prospects and necessitate global cooperation and support.