Barbados Completes Unprecedented Debt-for-Climate Operation

Washington, CMC

The Inter-American Development Bank (IDB) has announced that Barbados has successfully completed an unprecedented debt-for-climate operation to finance water and sewage projects resilient to climate change.

With support from its international funding partners, Barbados replaced outstanding, more expensive debt with more affordable financing, generating US$125 million in fiscal savings, which will be used to enhance water resource management and increase water and food security.

Debt Conversion Creates Fiscal Space

CIBC Cay has US$300 million in guarantees, US$150 million each from the IDB and the European Investment Bank (EIB), the latter under the European Union’s Global Gateway Initiatives.

With the support of the guarantees, Barbados secured a long-tenor, local currency loan at favorable conditions arranged by CIBC Caribbean, with regional banks investing in the transaction.

Water Reclamation Facility to Produce Reclaimed Water

The IDB said that the water reclamation facility, one of the first in the Caribbean, will produce water suitable for agricultural irrigation and groundwater recharge.

Additional Fiscal Space for Investments

The additional fiscal space also allows for investments to reduce water losses and improve the sewer system. Reducing marine and groundwater pollution will help protect marine ecosystems and nearshore reefs, groundwater quality, and public health.

Partnership and Funding

The IDB and the Green Climate Fund (GCF) provide a total of US$110 million in upfront funding for the project, including a US$40 million grant from the GCF.

Prime Minister’s Statement

“In the face of the climate crisis, this groundbreaking transaction serves as a model for vulnerable states, delivering rapid adaptation benefits for Barbados. 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,” said Prime Minister Mia Mottley.

Conclusion

Barbados’ debt-for-climate operation is a groundbreaking transaction that demonstrates the country’s commitment to addressing the challenges of climate change. The project will enhance climate resilience by increasing water availability, food security, and marine pollution, and serves as a model for other vulnerable states.

FAQs

Q: What is the debt-for-climate operation?
A: The debt-for-climate operation is a financial transaction that replaces outstanding debt with more affordable financing, generating fiscal savings that can be used to finance climate-resilient projects.

Q: What are the benefits of the debt-for-climate operation?
A: The debt-for-climate operation will enhance climate resilience by increasing water availability, food security, and marine pollution, and will also generate fiscal savings that can be used to finance other climate-resilient projects.

Q: Who are the partners involved in the debt-for-climate operation?
A: The partners involved in the debt-for-climate operation include the Inter-American Development Bank, the European Investment Bank, the Green Climate Fund, and CIBC Caribbean.

Q: What is the total upfront funding provided for the project?
A: The total upfront funding provided for the project is US$110 million, including a US$40 million grant from the Green Climate Fund.