Barbados has launched a landmark debt-for-climate operation to release funds for resilience projects.
International funding partners provided $300 million in guarantees that enabled Barbados to replace expensive debt with more affordable financing.
This debt swap transaction, structured as a Sovereign Sustainability-Linked Loan, will generate $125 million in savings that will be spent on improving water management and food security.
Specific projects earmarked for funding include transforming the South Coast sewage treatment plant into a modern water reclamation facility.
The loan comes with sustainability targets attached relating to the volume and quality of water reclaimed by the improved treatment plant. If these targets are not met, the government will be obligated to pay a penalty to the Barbados Environmental Sustainability Fund.
“In the face of the climate crisis, this groundbreaking transaction serves as a model for vulnerable states, delivering rapid adaptation benefits for Barbados,” said Barbados Prime Minister Mia Mottley.
“With upfront funding from our partners, we are building a state-of-the-art facility to boost water management, food security, and resilience—showcasing how innovation and cooperation drive environmental and fiscal gains.”
“This is an important milestone,” added Ilan Goldfajn, president of the Inter-American Development Bank (IDB) which provided $150 million in guarantees. “This is impact at scale with innovation and partnership at work.”
Fresh water in Barbados is mostly pumped from underground aquifers. The country has an average per capita water availability four times worse than the global average, making it one of the world’s most water-scare countries.
