Seychelles Blue Bond Economy Helps To Lower Its National Debt

CBx Vibe:Island Life” Janet Jackson

By CultureBanx Team

  • Seychelles paid back debt holders by making 30% of their exclusive economic zone marine protected areas
  • The African Development Bank approved a $10M loan to Seychelles for a COVID-19 response program

Seychelles, the tiny African island nation is proving its ability to pay back debt holders with the money raised from their unique blue bonds. They’ve made 30% of their exclusive economic zone marine protected areas, and have been able to use the blue bonds to ride the waves towards lowering national debt. Will Seychelles be able to continue lifting its “Blue Bond Economy” while  simultaneously promoting economic growth, environmental sustainability, and social inclusion?

Why This Matters: The Seychelles launched its blue bond economic roadmap using an integrated approach to the sustainable development of ocean resources. It started back in 2016, when international environmental The Nature Conservancy (TNC) bought some of the Seychelles’ debt from lenders at a hair cut. The Seychelles government then agreed to pay TNC back over time, and funnel the savings from its lower interest rates into ocean protection, which it has now achieved.

Seychelles government then agreed to pay TNC back over time, and funnel the savings from its lower interest rates into ocean protection

Here’s a little background on how Seychelles $15 million, 10-year blue bond works: It’s backed by a $5 million guarantee from the World Bank, along with a $5 million concessionary loan from the Global Environment Facility and investors will receive a 6.5% annual interest rate. This blue bond is modeled on the green- labelled debt which was pioneered by the World Bank and first emerged a decade ago. Moody’s expects issuance of green bonds to reach $300 billion in 2020.

Seychelles being the first country to sell debt earmarked specifically for ocean projects make sense, especially because fishing brings in 97% of its annual export earnings and employs 17% of the nation’s population. The concept has seen some traction worldwide, with both the Nordic Investment Bank and the World Bank launching their own blue bonds to address specific marine protection issues.

Situational Awareness: Ocean protection can be a complex and expensive business and the Seychelles is trying to face this head on. There are extensive challenges like insufficient economic diversification, a small domestic market and vulnerability to environmental shocks. The pandemic has seriously exacerbated these challenges and wiped out some of the country’s development gains. The African Development Bank recently approved a $10 million loan to the Seychelles to support the government’s COVID-19 response program.

CBx Vibe:Island Life” Janet Jackson

CONTRIBUTOR

CultureBanx Team

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