Central Bank of Barbados outlines Barbados’s 592.7 million debt-for-climate swap financing the South Coast Water Reclamation Project

The Central Bank of Barbados published an explainer on debt-for-development swaps, highlighting Barbados’s completed debt-for-climate swap as a mechanism to reduce debt service costs while redirecting resources to climate resilience without increasing debt distress. The 2024 transaction repurposed 592.7 million in domestic debt through a domestic banking sector syndicated loan fixed at 3.5 percent to facilitate early partial repayment of higher-coupon Series B, D and E bonds. Retired bonds totalled 595.7 million, keeping the transaction broadly neutral to the public debt stock, with guarantees provided by the Inter-American Development Bank and the European Investment Bank. Interest savings are estimated at 220 million over 10 years and are earmarked for the Barbados Climate Resilience South Coast Water Reclamation Project, co-funded by an IDB loan of 80 million, a Green Climate Fund loan of 60 million and an 80 million Green Climate Fund grant. The loan includes Sustainability Performance Targets tied to specified water management goals by November 2030, with any penalties redirected to the Barbados Environmental Sustainability Fund, and contains natural disaster and pandemic clauses allowing principal payment deferrals of up to two years following major shocks. The release also references Barbados’s 2022 debt-for-nature swap, which funded marine conservation and supported a Marine Spatial Plan.