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Gabon on August 15, 2023 announced a $500 million debt-for-nature swap. In Africa, it is the largest such deal signed by any country to refinance its debt and conserve marine resources.
Debt-for-nature swaps allow heavily indebted developing countries to seek help from financial institutions in the developed world with paying off their debt if they agree to spend on conservation of natural resources.
Usually banks in developed countries buy the debts of such counties and replace them with new loans which mature later. These have lower interest rates.
Gabon’s debt has been restructured under a Blue Bond in the world’s second-largest debt-for-nature swap.
In May 2023, the world’s first and largest debt swap to conserve oceans was signed by Ecuador. The country had exchanged $1.6 billion denominated bonds for a new $656 million loan.
Under the debt-for-nature swap, Gabon has agreed to a deal with the Bank of America, the US International Development Finance Corporation (USDFC) and The Nature Conservancy (TNC), to refinance $500 million in national debt toward marine conservation efforts in the country.
This is the fourth project under TNC’s “Blue Bonds for Ocean Conservation” strategy. Gabon is the fourth country to partner with TNC on a Blue Bonds project after Seychelles, Belize and Barbados.
As part of the deal with Gabon, USDFC is providing political risk insurance of up to $500 million for the financing, which lowers the cost of debt for Gabon.
This transaction will enable the country to make annual contributions to an independent conservation fund and an endowment that will continue to fund conservation after the bonds are repaid.
According to US International Development Finance Corporation, the Gabon Blue Bond will generate an expected $163 million in financing.
Gabon has agreed to spend $5 million a year from the savings over the next 15 years on marine conservation. These funds will be used for advancing critical conservation goals, protecting endangered species and supporting the country’s sustainable ‘blue economy”.
“This innovative financial transaction marks the launch of a comprehensive, long-term conservation project with a new funding stream to help Gabon finance ocean protection and management for 30 per cent of its ocean, in support of the nation’s overall commitment to protect 30 per cent of its lands, freshwater systems and ocean by 2030,” TNC said in a statement.
“The launch of Gabon’s Blue Bond is an important moment, giving us hope that green or blue financial mechanisms will grow significantly in coming years and help countries like Gabon, who effectively protect critical ecosystems whilst also growing our economies,” said Gabon President Ali Bongo Ondimba.
A government-led initiative called ‘Gabon Bleu’ announced in 2013, has contributed significantly to the expansion of marine protected areas. In 2014, Gabon became the first central African nation to protect its marine resources with the establishment of a marine protected area network.
As of February 2022, Gabon has created 20 protected areas, increasing protection of Gabonese waters from less than 1 per cent to 26 per cent, according to a research paper by the University of Exeter. As many as 20 marine protected areas across 51,955 square kilometres represent about 26 per cent of its ocean territory.
Going forward, the funds saved under the deal will further complement these efforts and expand its network of legally designated marine protected areas from 26 per cent of its ocean to 30 per cent.
In March 2023, the high-seas treaty agreed upon by the world offered an opportunity to protect 30 per cent of the world’s oceans and lands by 2030.
Under the agreement, Gabon committed to develop and implement a comprehensive marine spatial plan, designate 30 per cent of its ocean as biodiversity protection zones and improve the sustainability of the country’s fishing sector, said the USDFC.
Such innovative financial deals could make a significant contribution to addressing the critical challenges of climate change and biodiversity loss, said Ondimba. He urged the developed nations and multilateral banks to multiply these sorts of initiatives.