Posted on August 23, 2023
Gabon has finalized refinancing $500 million of its national debt for marine protection purposes, part of a rising trend of “debt-for-nature swap” transactions. The debt swap – equivalent to about four percent of Gabon’s debt – will unlock $5 million each year in the next 15 years. Ultimately, it will create an endowment expected to grow to around $88 million by 2038 to fund ocean conservation in Gabon.
This becomes the second debt-for-nature swap transaction in Africa after a similar agreement in Seychelles. The mechanism allows developing countries to reduce their external debt in exchange for funding for their biodiversity.
Gabon launched tenders for its blue bond in the London Stock Exchange last month. It saw Gabon buy-back $500 million of its international debt for $436 million, with the bond expected to mature in 2038. Investors had offered more than $1.1 billion.
As part of the blue bond agreement, Gabon committed to develop and implement a comprehensive national marine spatial plan, designate 30 percent of its ocean as biodiversity protection zones, and improve sustainability of the country’s fishing sector.
Gabon’s blue-bond transaction was led by the Bank of America, marking the bank’s debut into debt-for-nature swaps venture. The environmental NGO Nature Conservancy helped to develop the scheme while United States’ International Development Finance Corporation provided political risk insurance.
“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 President Ali Bongo Ondimba of Gabon.
Gabon’s ocean territory contains globally important habitat for endangered species, including about 30 percent of the world’s remaining leatherback turtles. In addition, Gabon’s waters are also critically important for seasonal breeding for humpback whales and are home to endangered dolphins, sharks, and ray species.
Recently, Ecuador also struck a major debt-for-nature swap deal, refinancing $1.6 billion of its commercial debt in exchange for steady conservation funding for the Galapagos Islands.