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International Monetary Fund (IMF) continues to tout Belize Blue Bond

Posted: Tuesday, May 10, 2022. 12:32 pm CST.

By Aaron Humes: The International Monetary Fund (IMF) has delivered further praise for Belize’s unique Blue Bond initiative – saying in a recent article it has provided a “vital boost” to the Barrier Reef’s survival due to monies being made available for marine conservation.

The Blue Bond is a so-called “debt-for-nature” swap in which the Nature Conservancy (TNC), through a subsidiary, lent funds to Belize to buy back the US$553 million “Superbond” – external commercial debt equivalent to 30 percent of national GDP – at 55 cents on the dollar by issuing US$364 million in blue bonds underwritten by Credit Suisse and insured by the U.S. International Development Finance Corporation (DFC) at a low interest rate, 10-year-grace period and 19 years maturity.

Belize has in return agreed to spend US$4 million on marine conservation until 2041; double its marine-protection parks—spanning coral reefs, mangroves, and the sea grasses where fish spawn—from 15.9 percent of its oceans to 30 percent by 2026 and set up an endowment fund of $23.5 million to finance conservation after 2040.

Jaime Guajardo, the IMF’s mission chief for Belize, said the deal is of tremendous benefit to the country and contributes to the authorities’ objectives of restoring debt sustainability, promoting sustainable development, and enhancing resilience to natural disasters and climate change.

The IMF says that while such swaps are not new, essentially working as grants for bilateral debt, Belize’s deal is unique because the bond market provided the grant by discounting the price, and that the Superbond debt owed to private creditors was paid off by finance from a different class of private investors. It is more complicated than similar previous swaps and investors were cautious because of Belize’s history of defaults and deferrals dating back to 2010.

The U.S. DFC’s backing led to a strong investment-grade credit rating of Aa2 from Moody’s, as well as TNC’s three-decade history running conservation programs in the country assuring that investors could be sure that the promised marine protection would actually take place. They would not, in other words, face charges of “bluewashing.”

The IMF says similar swaps can now be arranged in the image of Belize and Seychelles and TNC is exploring similar arrangements with seven other countries, though none with the size of Belize’s debt relative to GDP and savings realized from the initiative.

 

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