Seychelles Blue Bond Economy helps to lower its National Debt

Seychelles is proving its ability to pay back debt holders with the money raised from their unique blue Bonds. The country has 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. Will Seychelles be able to continue lifting its “Blue Bond Economy” while simultaneously promoting economic growth, environmental sustainability, and social inclusion?

The Breakdown

You Need To Know:

Culture Banx reported the Seychelles launched its blue bond economic roadmap using an integrated approach to the sustainable development of ocean resources. It started back in 2016, when international environmental The Nature Conservancy (TNC) bought some of the Seychelles’ debt from lenders at a haircut. The Seychelles government then agreed to pay TNC back over time, and to funnel the savings from its lower interest rates into ocean protection, which it has now achieved.

Here’s a little background on how 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 MCO -1% expects issuance of green bonds to reach $300 billion in 2020.

Banking on Blue:

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.

Ocean protection can be a complex and expensive business and the Seychelles is trying to face this head on. There are extensive challenges like insufficient economic diversification, a small domestic market and vulnerability to environmental shocks. The pandemic has seriously exacerbated these challenges and wiped out some of the country’s development gains. The African Development Bank recently approved a $10 million loan to the Seychelles to support the government’s COVID-19 response program

Situational Awareness:

Seychelles has also been battling some other issues impacting its economy with nearly 10% of the working population addicted to heroin. This means per capita, Seychelles suffers from the highest rate of heroin abuse in the world, and could derail its upwards economic trajectory. The government has tried to tackle the problem with the rollout of the two rehabilitation programs, forcing the price of heroin in Seychelles to drop. A line of the drug used to cost around $73 but now it can be bought for around $2.20, according to government officials.