Bar­ba­dos has com­plet­ed an un­prece­dent­ed debt-for-cli­mate op­er­a­tion to fi­nance wa­ter and sewage projects re­silient to cli­mate change.

In a news re­lease, CIBC Caribbean said through sup­port from its in­ter­na­tion­al fund­ing part­ners, Bar­ba­dos re­placed out­stand­ing, more ex­pen­sive debt with more af­ford­able fi­nanc­ing, gen­er­at­ing US$125 mil­lion in fis­cal sav­ings which will be used to en­hance wa­ter re­source man­age­ment and in­crease wa­ter and food se­cu­ri­ty.

CIBC Caribbean, as lead arranger, closed the sus­tain­abil­i­ty-linked loan trans­ac­tion ear­li­er this month.

“The loan was backed by US$300 mil­lion in guar­an­tees - US$150 mil­lion each from the In­ter-Amer­i­can De­vel­op­ment Bank (IDB) and the Eu­ro­pean In­vest­ment Bank (EIB), the lat­ter un­der the Eu­ro­pean Union's Glob­al Gate­way Ini­tia­tive. With the sup­port of the guar­an­tees, Bar­ba­dos se­cured a long-tenor, lo­cal cur­ren­cy loan at favourable con­di­tions arranged by CIBC Caribbean, with re­gion­al banks in­vest­ing in the trans­ac­tion,” the re­lease stat­ed.

CIBC Caribbean not­ed that the debt con­ver­sion will cre­ate the nec­es­sary fis­cal space to fi­nance up­grad­ing the South Coast sewage treat­ment plant in­to a mod­ern wa­ter recla­ma­tion fa­cil­i­ty plus sev­er­al as­so­ci­at­ed fa­cil­i­ties.

The wa­ter recla­ma­tion fa­cil­i­ty, one of the first in the Caribbean, it said will pro­duce wa­ter of a suit­able qual­i­ty for use in agri­cul­tur­al ir­ri­ga­tion and ground­wa­ter recharge. The ad­di­tion­al fis­cal space al­so al­lows for in­vest­ments to re­duce wa­ter loss­es and im­prove the sew­er sys­tem.

“The re­duc­tion in ma­rine and ground­wa­ter pol­lu­tion will help pro­tect ma­rine ecosys­tems and nearshore reefs, ground­wa­ter qual­i­ty and safe­guard pub­lic health. The IDB and the Green Cli­mate Fund (GCF) are pro­vid­ing a to­tal of US$110 mil­lion up­front fund­ing for the project, in­clud­ing a US$40 mil­lion grant from the GCF,” the re­lease de­tailed.

It ex­plained that Bar­ba­dos, one of the world’s most wa­ter-scarce coun­tries, faces an av­er­age per capi­ta wa­ter avail­abil­i­ty four times less than the glob­al av­er­age—a chal­lenge set to wors­en with cli­mate change. It al­so faces a large an­nu­al food im­port bill, as farm­ers lack wa­ter to ex­pand crop pro­duc­tion.

The buy-back will fi­nance a new fa­cil­i­ty to boost wa­ter man­age­ment, food se­cu­ri­ty and re­silience, Bar­ba­dos' Prime Min­is­ter Mia Mot­t­ley said in the re­lease.

"In the face of the cli­mate cri­sis, this ground­break­ing trans­ac­tion serves as a mod­el for vul­ner­a­ble states, de­liv­er­ing rapid adap­ta­tion ben­e­fits for Bar­ba­dos," she said.

CIBC Caribbean’s CEO, Mark St. Hill com­ment­ing on the com­ple­tion said, “Bar­ba­dos’ ini­tia­tive en­hances cli­mate re­silience and sets a bench­mark for sus­tain­able adap­ta­tion for the Caribbean. CIBC Caribbean is ho­n­oured to again col­lab­o­rate with the Gov­ern­ment of Bar­ba­dos and mul­ti­lat­er­al agen­cies like the IDB and EIB in set­ting prece­dents for in­no­v­a­tive fi­nan­cial mech­a­nisms that dri­ve en­vi­ron­men­tal stew­ard­ship in our re­gion. This part­ner­ship un­der­scores our com­mit­ment to ac­cel­er­at­ing cli­mate ac­tion and fos­ter­ing sus­tain­able de­vel­op­ment across the Caribbean.”