Barbados Forms Coalition for Resilient Infrastructure

At the Summit for a New Global Financing Pact in Paris, the government of Barbados announced an integrated package of innovative initiatives to accelerate its transition to net zero, boost resilience, empower workers, and attract private sector investment while prudently managing public debt levels. These initiatives are founded on the ongoing climate policy reforms supported by the Resilience and Sustainability Facility of the International Monetary Fund, which are anticipated to play a catalytic role in mobilising private and public sector financing for climate projects.

This collection of initiatives reflects unprecedented cooperation and a new “system approach” between the Government, its Resilience and Sustainability Facility (RSF) at the International Monetary Fund (IMF), and Barbados’ long-standing financing partners: Inter-American Development Bank (IDB), World Bank Group (WBG), Development Bank of Latin America and the Caribbean (CAF), European Investment Bank (EIB), and Green Climate Fund (GCF).

Barbados is extremely susceptible to the effects of climate change, and it must make substantial investments to safeguard its citizens from hurricanes, flooding, and droughts and to preserve its natural capital. It is committed to attaining sustainable levels of public debt, which limits the government’s ability to borrow for public investments. Together with its financing partners, it has identified four complementary approaches to address these obstacles.

A New Green Blue Bank

In a first of its kind, the government of Barbados has decided to fund a new Blue Green Bank with $10 million from the fiscal space created by the RSF.

This capital can support five times the quantity of the loan. It will pave the way for other partners, including GCF, CAF, and IDB, to provide technical assistance or capital to the Blue Green Bank, with GCF proposing to its Board in July to become a co-founding partner in the bank.

Once established, The Blue Green Bank will help finance over $250 million in green investments in affordable housing, hurricane-resistant roofing, the electrification of public and private transportation, and other investments in line with the Paris Agreement.

New Low-Cost, Long-Term Loan Instruments from Development Finance Institutions Increase the Resilience of Infrastructure.

Low-cost and long-term financing instruments from the EIB, CAF, IDB, GCF, and RSF will support the government’s investments in resilient water and waste treatment infrastructure, flood and coastal protection, and its efforts to transform state-owned enterprises and empower employees.

To support a US$165 million loan facility, the European Investment Bank (EIB) has made grants from the European Union (EU) totaling US$18 million available to support climate-resilient water, sanitation, and clean ocean projects across the Caribbean.

The GCF will provide grants of up to $1.5 million per project for end-to-end project preparations, innovation, and transformative impact, as well as for preparing investment proposals for additional GCF funding.

Better and More Affordable PPPs

The multilateral financing partners of Barbados will bolster project preparation support to attract private investment in Private Public Partnerships (PPP) in order to construct infrastructure with greater resilience. The IDB will assist in enhancing the government’s capacity and proficiency in PPPs.

The Multilateral Investment Guarantee Agency of the World Bank Group has provided investment guarantees to assist reduce the cost of private sector financing.

The International Finance Corporation of the World Bank Group will assist Barbados in developing the country’s first large-scale onshore wind project and strengthening the grid’s resilience.

Creating New Debt-Free Investments in the Environment and Social Capital

The government of Barbados is collaborating with its development partners to build on the success of the 2022 Blue Bond with the Inter-American Development Bank (IDB) and The Nature Conservancy, which released approximately $50 million in new funds for marine conservation. Specifically, a new generation of instruments to support investments in nature and social capital is emphasised.

Together, these initiatives will assist Barbados in achieving its resilience goals and protecting its citizens, as well as transforming its economy and preserving its pristine natural environment.

Quotes

• The Prime Minister of Barbados, Mia Mottley, stated, “In addition to new capital, innovative instruments, partnerships, and new methods of collaborating are essential if we are to overcome the challenges posed by climate, pandemics, and debt. These newly declared integrated initiatives exemplify what can be accomplished through new cooperative methods of working together.”
• The Managing Director of the International Monetary Fund, Kristalina Georgieva, stated, “We applaud Barbados’ initiatives to catalyse private climate finance and the related push to unite multiple partners in pursuit of a common objective. The Fund is completely committed to supporting our members’ efforts to meet their climate goals, including through the Resilience and Sustainability Facility, and we look forward to continuing our partnership with Barbados as the government works to green the economy.”
• Ilan Goldfajn, president of the Inter-American Development Bank Group, stated, “The IDB has been one of Barbados’ closest and most devoted development partners for a long time.” We are thrilled to take advantage of this opportunity to collaborate with the IMF and other partners to build on the success of our recent blue bond issuance and promising project preparation and structuring experiences across the region to help catalyse new and larger volumes of private financing for climate-smart investment. These and other innovative financing and support mechanisms will be essential for Barbados to meet the challenges of a climate that is swiftly changing.”
• Sergio Daz-Granados, Executive President of CAF, stated that as a homegrown development bank owned by Latin American and Caribbean nations, CAF recognises the myriad challenges faced by small islands, such as Barbados, as a result of climate change. “The CAF is committed to contributing to the channelling of increased resources and is delighted to join forces with other development partners to mobilise dedicated financing that will help to strengthen the resilience of our member countries.”
• Werner Hoyer, president of the European Investment Bank, stated, “We have no time to waste in assisting nations like Barbados, which are already experiencing the devastation of climate change.” In response to Prime Minister Mia Amor Mottley’s call to action, we are providing prompt, targeted assistance. We will begin offering longer loan terms to low- and middle-income nations, and we will endeavour to include natural disaster risk clauses in our loans so that the most vulnerable communities can recover and rebuild after a disaster. Together with our Team Europe partners, the EIB, as the EU Climate Bank, is continuously working to increase the impact of its climate lending and support for vulnerable countries such as Barbados.”
• Henry Gonzalez, interim executive director of the Green Climate Fund, stated, “The Blue Green Bank will transform the financing landscape in Barbados and stimulate new financing for sustainable climate investments.” GCF has provided technical and financial support for the development of this concept, and at its meeting next month, our Board will contemplate making a substantial investment in the new Bank.”
• IFC Managing Director Makhtar Diop stated, “Barbados is redoubling its efforts to strengthen climate resilience and become a low-carbon leader. IFC will continue to work closely with the nation and collaborate with other multilateral institutions to expedite the movement of private capital in support of Barbados’ ambitions.”