Posted: Tuesday, May 10, 2022. 12:32 p.m. CST.
By Aaron Humes: The International Monetary Fund (IMF) has praised Belize’s unique Blue Bond initiative – saying in a recent article that it has provided a “vital boost” to the survival of the barrier reef thanks to funds made available for marine conservation.
The Blue Bond is a so-called “debt for nature” swap in which the Nature Conservancy (TNC), through a subsidiary, lent funds to Belize to redeem the US$553 million “Superbond” – a debt external trade equivalent to 30% of national GDP – at 55 cents on the dollar by issuing US$364 million in blue bonds underwritten by Credit Suisse and insured by the US International Development Finance Corporation (DFC) at a low interest rate, a grace period of 10 years and 19 years maturity.
Belize in return agreed to spend US$4 million on marine conservation through 2041; doubling its marine protection parks – covering coral reefs, mangroves and seagrass beds where fish spawn – from 15.9% of its oceans to 30% by 2026 and creating a $23.5 million endowment fund dollars to fund conservation after 2040.
Jaime Guajardo, IMF Mission Chief for Belize, said the agreement was extremely beneficial for the country and contributed to the authorities’ goals of restoring debt sustainability, promoting sustainable development and building disaster resilience. natural and climate change.
The IMF says that while these swaps are not new, essentially functioning as subsidies for bilateral debt, the Belize deal is unique because the bond market provided the subsidy by discounting the price, and the Superbond debt owed to private creditors was repaid by financing a different category of private investors. It’s more complicated than previous similar swaps and investors were cautious due to Belize’s history of defaults and deferrals dating back to 2010.
Support from the US DFC led to a strong Aa2-grade credit rating from Moody’s, as well as TNC’s three-decade conservation programs in the country, ensuring investors could be confident the promised marine protection would actually take place. . In other words, they would not be accused of “bluewashing”.
The IMF says similar swaps can now be arranged like Belize and Seychelles and TNC is exploring similar deals with seven other countries, but none with the size of Belize’s debt to GDP ratio and savings from on the initiative.
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