Barbados has launched a ‘debt for climate resilience’ swap, generating $125 million in fiscal savings that will be directed toward climate-resilient investments in water and sewage projects.
The first-of-its-kind climate resilience initiative was announced by the Caribbean island alongside an assortment of international funding partners, and sees the country replace outstanding, more expensive debt with more affordable financing.
This was supported by guarantees from the Inter-American Development Bank (IDB) and the European Investment Bank (EIB) under the EU’s Global Gateway Initiative.
‘Groundbreaking transaction’
“In the face of the climate crisis, this groundbreaking transaction serves as a model for vulnerable states, delivering rapid adaptation benefits for Barbados,” commented Mia Mottley, Barbados’ prime minister.
“With upfront funding from our partners, we are building a state-of-the-art facility to boost water management, food security, and resilience—showcasing how innovation and cooperation drive environmental and fiscal gains.”
The financing will be used to modernise the country’s South Coast sewage treatment plant into a water reclamation facility, reducing water losses and producing water of a suitable quality for use in agricultural irrigation and groundwater recharge.
In addition, investment will be made in reducing water losses and improving the sewer system, with the reduction in marine and groundwater pollution helping to ‘protect marine ecosystems and nearshore reefs, groundwater quality and safeguard public health’, the European Investment Bank said in a statement.
Water-scarce country
Barbados is one of the world’s most water-scarce countries, with an average per capita water availability four times less than the global average. This, in turn, has led to a significant annual food import bill, given that farmers lack sufficient water for irrigation.
The debt-for-climate conversion is structured as a Sovereign Sustainability-Linked Loan (SSLL), tied to specific sustainability targets for reclaimed water.
“This is an important milestone in several dimensions. It is the first debt-for-climate operation focused on climate resilience, paired with a groundbreaking financial innovation with unprecedented partnerships” added IDB president Ilan Goldfajn. “This is impact at scale with innovation and partnership at work.” Read more here.
