Financing the Blue Economy in the Caribbean via Debt Conversions
Small Island Developing States (SIDS) in the Caribbean and elsewhere are highly vulnerable to the various impacts of climate change. However, extremely high public debt ratios impede these countries’ abilities to invest in climate change adaptation actions, such as modifying infrastructure and nature-based solutions to improve coastal and flood protection. In addition, debt and related budget constraints limit the ability of Caribbean governments to properly finance the marine conservation and sustainable fisheries commitments they have made (e.g. under the Caribbean Challenge Initiative and the CARICOM Common Fisheries Policy.
In February 2016, The Nature Conservancy (TNC) successfully supported the Government of the Seychelles in financing an approximately US$22 M debt buy-back with its Paris Club creditors. Via this debt conversion and based on the completion of a science-based, multi-stakeholder Marine Spatial Plan (MSP), the Government of the Seychelles agreed to place 30% of their entire Exclusive Economic Zone, or approximately 400,000 km2 into Marine Protected Areas. At least half of this area (200,000 km2) will be designated as no-take fish-replenishment zones – a significant increase from the 1% previously designated. The MSP will also update and strengthen their fisheries, marine and coastal zone policies and management regimes. The debt conversion will provide upwards of $400,000 per year in sustainable financing for marine conservation and ecosystem based adaptation to climate change in the Seychelles and will also capitalize a $6.5 M endowment.
Building on the success of the Seychelles debt conversion, TNC is currently working with countries in the Caribbean, including the Bahamas, Grenada and St. Lucia to transact similar debt conversions in the coming years. TNC is assisting these countries with brokering their debt restructuring with commercial and/or bi-lateral creditors, in return for the countries making conservation and policy commitments at a similar scale as the Seychelles. TNC is also assisting these countries in raising the necessary grant and loan funding to finance these debt conversions as well as the grant capital to finance the Marine Spatial Plans. The German Government through the German Development Bank (KfW) will be providing grant capital to finance some of these debt conversions.
Robert Weary is a Senior Director, NatureVest, who has been leading The Nature Conservancy’s work to develop these debt conversions