Belize Explores Debt for Climate Swaps in Commonwealth Webinar
Debt levels were high for many countries prior to the COVID-19, but the pandemic has worsened the situation in many low and middle-income countries. Revenue collection and economic activity have declined drastically, making it hard to service debts. The Government of Belize, in collaboration with the Commonwealth Secretariat, is looking for financial instruments available in the Caribbean, such as debt for climate swaps. This is not new to Belize, since there was one such swap in the early 2000’s, but the situation is different this time around, prompting G.O.B. to look carefully before it leaps. News Five’s Duane Moody reports.
Duane Moody, Reporting
Debt-for-Climate Swap is an innovative financial arrangement that is once again being explored by the Caribbean region to help with the economic crunch and the struggles to meet debt obligations. Today, the Commonwealth Secretariat held a webinar with key stakeholders from Belize and other CARICOM states.
Orlando Habet
Orlando Habet, Minister of Sustainable Development, Disaster Risk Climate Change
“It is happening at a time when our countries are facing multiple challenges relating to the COVID-19 pandemic, challenges in resilient economic recovery and the incremental adverse effects of climate change. Many economies in our region have been negatively impacted with increase debt burden and have the challenge of investing resources towards climate action. Debt for climate and nature swap is an option for our countries to explore the potential to address these issues.”
According to Climate Change Minister Orlando Habet, involvement and engagement of the Ministry of Finance is crucial to ensuring effective – and appropriate – financial recovery mechanisms. Minister of State in the Ministry of Finance, Chris Coye says Belize ultimately does not need debt-for-climate swap; it needs debt relief, climate resiliency and sustainable human development. But he attended the webinar today to find out more.
Chris Coye
Chris Coye, Minister of State, Ministry of Finance
“The current price of Belize’s super bond is in or around forty cents on the dollar. If a debt-for-nature swap is achieved at that discounted price that discount is not necessarily a benefit achieved by the swap itself. That was a market-determined discount on the basis of a market-based assessment of the repay ability of such bond given Belize’s expected economic situation over the remaining life of the bond. Since that is not necessarily a benefit achieved by the swap, then it follows that the absence of a debt-for-nature swap-based benefit does not provide a sufficient justification for the discount to be paid by way of funding local climate or environmental projects. Will the swap enable the funding of those resource losses – for example through supplementary grant funding – if not, is the swap worth the cost? So while we are grateful to our partners for their efforts to assist us to confront the increasing challenges ahead, I want us to strengthen our position by fully informing ourselves on all the relevant factors, costs and implications.”
So to ensure that the country would get value for foregoing human development opportunities in areas such as agriculture, an overview of updated information about the debt-for-nature mechanisms must be forthcoming so that informed decisions can be made. The Commonwealth Secretariat’s Climate Finance Access Hub is assisting with just that.
Arjoon Suddhoo
Dr. Arjoon Suddhoo, Deputy Secretary General, Commonwealth
“A multifaceted challenge requires a multifaceted solution. Debt for climate and nature swaps can help address this major obstacle. These financial instruments can help address the public debt levels while at the same time provide resources to help countries build resilience to climate change. The Commonwealth Secretariat and its Climate Finance Access Hub is supporting its member countries to enhance the access to climate finance.”
Chris Coye
“The tendency thus far is to focus on the acquisition and management cost of these areas to be protected with minimal consideration given to the costs associated with the human development opportunities that we forego by putting these resources under protective status. That is a critical cost factor that we not only need to quantify, but if we proceed with a swap, we need to have developed and funded alternative plans for.”
Duane Moody for News Five.
