Seychelles’ Blue Bond Economic Roadmap, a small African island nation in Seychelles that uses an integrated approach to the sustainable development of marine resources, encouraged Belize to try a similar approach to reduce debt. .. Berry’s recently announced a tender offer for an existing $ 535 million Eurobond due in 2034. This will be covered by the simultaneous issuance of Blue Bonds. Can Berry’s use the “Blue Bond Economy” playbook to reduce government bonds with the same success as Seychelles, the first sovereign entity to issue Blue Bond?
Breakdown you need to know:
The Blue Bond concept aims to use debt revenues to finance water-related and / or marine-based projects. In 2020, Saychel was able to create 30% of the exclusive economic zone marine protected area and use blue bonds to ride the wave towards government bond cuts.
It began in 2016 when an international environmental organization (TNC) purchased a portion of Seychelles’ debt from a lender with a haircut. The Seychelles government then agreed to make a long-term repayment to TNC and pour low interest rate savings into marine conservation. This is currently being achieved.
Here’s why the 2018 Seychelles $ 15 million, 10-year Blue Bond works: Investors receive 6.5%, backed by a $ 5 million guarantee from the World Bank and a $ 5 million concessional loan from the Global Environment Facility. Annual interest rate. This blue bond is modeled after the Green Label debt, which was pioneered by the World Bank and first appeared 10 years ago.Moody’s
Blue Belize Banking:
Belize’s bid expects to reduce currently unpaid principal by 45%. This will reduce national debt by about 9% of GDP. Since its first debut in 2000, when the country was in the BB range, Belize has been unable to reduce its debt burden by rebuilding Eurobonds four times. We are still waiting for details of the country’s blue bond, which has not yet been announced.
It makes sense that Seychelles was the first country to sell debt allocated specifically for marine projects. In particular, the fishing industry brings 97% of annual export revenue and employs 17% of the country’s population. This concept has seen some traction around the world, with both the Nordic Investment Bank and the World Bank launching their own blue bonds to address specific marine conservation issues.
Marine conservation can be a complex and costly business, and Seychelles faces this issue head-on. There are a wide range of challenges, including inadequate economic diversification, small domestic markets, and vulnerability to environmental shocks. The pandemic has exacerbated these challenges and wiped out some of the country’s development interests.
The African Development Bank recently approved a $ 10 million loan to Seychelles to support the government’s COVID-19 compliance program. At the time the Seychelles Blue Bond was issued, the country was rated BB- by Fitch and had a non-payment agreement with the IMF. It was then upgraded to BB, but downgraded to B due to the impact of the pandemic on tourism and the broader economy.