CBx International

Africa’s Seychelles Blue Bond Economy Inspires Belize

Oct 14

By CultureBanx Team

  • Seychelles was the first sovereign entity to issue a blue bond for $15M
  • Belize announced a tender offer for its existing $553 million Eurobond to be financed by the placement of a blue bond

The tiny African island nation of Seychelles blue bonds economic roadmap using an integrated approach to the sustainable development of ocean resources, has inspired Belize to attempt a similar approach to lower its debt. Belize recently announced a tender offer for its existing $553 million Eurobond due in 2034, which will be financed by the concurrent placement of a Blue bond. Will Belize be able to find the same success as Seychelles, the first sovereign entity to issue a blue bond, by leveraging its “Blue Bond Economy” playbook to reduce national debt?

Why This Matters: The Blue bond concept aims to use debt proceeds to finance water-related and/or ocean-based projects. In 2020, Seychelles 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.

Here’s a little background on how the 2018 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 $375 billion in 2021.

Belize Banking on Blue: Belize’s tender envisions a 45% haircut on the currently outstanding principal, which would reduce the country’s debt by approximately 9% of GDP. Since its inaugural debut bond in 2000, when the country was in the BB range, Belize has restructured its Eurobond four times and has not managed to reduce its debt burden. We’re still awaiting details of the country’s blue bond that have not yet been announced.

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: The African Development Bank recently approved a $10 million loan to the Seychelles to support the government’s COVID-19 response program. At the time when Seychelles blue bond was issued the country was rated BB- by Fitch and had a non-disbursing agreement with the IMF. It has since been upgraded to BB, but has since been downgraded to B on the back of the impact of the pandemic on tourism and the broader economy.

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