WASHINGTON, CMC – Barbados Prime Minister Mia Mottley has welcomed the decision by the Inter-American Development Bank (IDB) and the European Investment Bank (EIB) to provide guarantees totaling US$300 million to support an innovative debt-for-climate operation that will help the island unlock much-needed resources to invest in critical climate adaptation projects while safeguarding other priorities such as social spending on health and education.
The two financial institutions said they each approved a US$150 million guarantee, marking the first time they have provided joint guarantees for a single operation in the Caribbean.
“This groundbreaking collaboration between the IDB and the EIB marks a historic moment for Barbados and sets a robust, scalable model for other vulnerable nations. With these loan guarantees, we are securing our nation’s water and food resources and fortifying our resilience against the ever-looming threat of the climate crisis.
“This initiative exemplifies how innovative climate financing can drive meaningful change, ensuring a sustainable future for our people and planet,” said Prime Minister Mia Mottley.
EIB President Nadia Calviño said the financial institution has consolidated its role as the Climate Bank, supporting investments that reinforce the resilience of most affected countries.
“I am proud that the EIB Group participates in the first-ever debt-for-climate conversion and, through our partnership with the European Commission, the IDB, and the government of Barbados, sets an important milestone in innovative financing for climate action,” Calviño added.
European Union Commissioner Jutta Urpilainen said this operation exemplifies how the Global Gateway Investment Agenda for Latin America and the Caribbean delivers innovative solutions to enhance partner countries’ resilience and directly benefit citizens. “These crucial resources help Barbados address climate vulnerabilities and invest in resilient infrastructures,” she said.
“Our partnership with the EIB and Barbados shows how international development organizations are working together as a system with governments to devise innovative financial solutions to mobilize more resources for more impactful climate-resilient investments,’’ said Ilan Goldfajn, IDB President.
“Barbados is at the forefront of financial innovation and partnerships. We reached this important major achievement because of the country’s strategic vision and commitment to a climate-resilient future.”
The IDB and the EIB said that the combined effort on innovative climate financing and project preparation will amplify the scale and impact of Barbados’ investment in climate-resilient infrastructure. The two banks added that the guarantees would be used in a debt-for-climate conversion plan announced late last year.
The plan creates fiscal space, allowing the government to invest in resilience, which would only be possible if the current budgetary limitations exist.
The guarantees will also help Barbados advance its resilience plans outlined in the country’s Updated Nationally Determined Contributions (NDC) under the Paris Agreement and the Roofs to Reefs Programme by holistically increasing water availability and food security and enhancing the country’s resilience.
The guarantees support implementing the European Union’s Global Gateway investment strategy and enable Barbados to access crucial water and climate financing.
The operation will provide Barbados with the resources for infrastructure investments, including the South Coast Water Reclamation Project. This project will increase the island’s water security in the context of climate change impacts and improve sanitation services.
The project will upgrade the South Coast sewage treatment plant, allowing it to reclaim water used in irrigation. This will recharge local aquifers while preventing untreated wastewater from being discharged into the ocean, helping protect marine ecosystems and nearshore reefs and safeguarding public health.
Under the guarantee program, Barbados has developed a set of policies that will strengthen the government’s capacity to prepare and implement new climate investments, protect and augment scarce groundwater resources, and boost agricultural production.
The government will also commit to improving tax and debt management and develop strategies to enhance the country’s financial resilience to natural disasters such as hurricanes and flooding.
Complementary government investments in reducing water losses in the supply network ensure a comprehensive water security investment program.
The recent impacts of Hurricane Beryl highlight the vulnerability of the Caribbean region and small island developing states to climate change. Hot ocean temperatures are predicted to drive the 2024 Atlantic hurricane season, which is expected to be unusually active and intense.
Beryl set a historical record for becoming a Category 5 hurricane early in the season. This operation results from collaborative efforts among Multilateral Development Banks (MDBs) to provide innovative tools to address the challenges and effects of climate change.
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