Friday, 22 November, 2024
The Maldives is moving forward with a debt-for-nature swap, aimed at converting existing national debt into funds for the preservation of critical ecosystems such as coral reefs, mangroves, and sea grass, according to the country's Minister of Climate Change, Environment, and Energy, Thoriq Ibrahim.
Debt-for-nature swaps, increasingly adopted by debt-ridden countries in recent years, involve exchanging high-interest debt for lower-cost loans with backing from multilateral lenders. This process helps free up financial resources that can be redirected into environmental conservation efforts.
“We need to understand the value of our natural assets,” Ibrahim told Reuters during the COP29 U.N. climate talks in Baku, Azerbaijan. He explained that the Maldives has already begun assessing the value of its coral reefs, with plans to extend this valuation to its mangroves and sea grass. “This is the foundation to start with,” he added.
In recent days, the Maldives government signed an agreement with The Nature Conservancy, a U.S.-based conservation group known for facilitating such swaps globally. However, a spokesperson for the organization declined to comment further on the details of the deal.
The Maldives has faced mounting financial pressures, with dwindling foreign currency reserves raising concerns about its ability to meet future debt obligations. The country is particularly worried about a $500 million sukuk (Islamic bond) maturing in 2026, which could potentially push it toward default, making it the first nation to do so on Islamic sovereign debt.
According to sources familiar with the situation, the Maldives has issued a "request for proposal" to appoint a bank and financial advisors to guide the debt-for-nature transaction, though no lender has been selected yet. Ibrahim noted that discussions are ongoing regarding whether the swap will involve the Islamic bond, bilateral debts, or a combination of both, and the final size of the swap has not been determined.
As of the first quarter of this year, the Maldives' total public and publicly guaranteed debt stood at $8.2 billion, or 116% of its GDP, according to World Bank data. A significant portion of this debt is external, with China and India holding loans worth $1.37 billion and $124 million, respectively.
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The Maldives is moving forward with a debt-for-nature swap, aimed at converting existing national debt into funds for the preservation of critical ecosystems such as coral reefs, mangroves, and sea grass, according to the country's Minister of Climate Change, Environment, and Energy, Thoriq Ibrahim.
Debt-for-nature swaps, increasingly adopted by debt-ridden countries in recent years, involve exchanging high-interest debt for lower-cost loans with backing from multilateral lenders. This process helps free up financial resources that can be redirected into environmental conservation efforts.
“We need to understand the value of our natural assets,” Ibrahim told Reuters during the COP29 U.N. climate talks in Baku, Azerbaijan. He explained that the Maldives has already begun assessing the value of its coral reefs, with plans to extend this valuation to its mangroves and sea grass. “This is the foundation to start with,” he added.
In recent days, the Maldives government signed an agreement with The Nature Conservancy, a U.S.-based conservation group known for facilitating such swaps globally. However, a spokesperson for the organization declined to comment further on the details of the deal.
The Maldives has faced mounting financial pressures, with dwindling foreign currency reserves raising concerns about its ability to meet future debt obligations. The country is particularly worried about a $500 million sukuk (Islamic bond) maturing in 2026, which could potentially push it toward default, making it the first nation to do so on Islamic sovereign debt.
According to sources familiar with the situation, the Maldives has issued a "request for proposal" to appoint a bank and financial advisors to guide the debt-for-nature transaction, though no lender has been selected yet. Ibrahim noted that discussions are ongoing regarding whether the swap will involve the Islamic bond, bilateral debts, or a combination of both, and the final size of the swap has not been determined.
As of the first quarter of this year, the Maldives' total public and publicly guaranteed debt stood at $8.2 billion, or 116% of its GDP, according to World Bank data. A significant portion of this debt is external, with China and India holding loans worth $1.37 billion and $124 million, respectively.
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