By Libby George
HAMBURG (Reuters) – An enquiry into Ecuador’s landmark debt-for-nature swap has not slowed work on the increasingly popular instruments, the president of the Inter-American Development Bank told Reuters.
The bank expects to finalise its next swap with Barbados within two months and is continually working on new deals, IDB President Ilan Goldfajn said in an interview.
“We’re getting proposals every day for debt-for-education, for debt-for-blue-economy, debt-for-health,” Goldfajn said, speaking on the sidelines of the Hamburg Sustainability Conference.
The swaps help debt-laden countries finance environment or social projects by exchanging existing debt for cheaper loans, typically with a credit guarantee from a multilateral development bank.
The IDB’s independent oversight body is scrutinizing whether Ecuador’s “debt-for-nature” swap, which converted $1.6 billion of debt into cheaper lending, breached the IDB’s policies regarding transparency.
Goldfajn said he expected the investigators to send a mission to Ecuador.
“From our point of view, the transaction went very well,” he said.
The bank and its partners, he said, would focus on ensuring the estimated $1 billion in savings had maximum impact.
Goldfajn declined to outline the size of the Barbados swap, which he expects will be closed “in a couple of months.” In July, the bank and the European Investment Bank finalised a $300 million guarantee that would channel savings towards water supply issues and to cut the pollution going into the Caribbean.
SPECIAL DRAWING RIGHTS
Goldfajn said the bank is progressing talks with governments in Latin America, the Middle East and Asia, aiming to sign the first country to donate IMF reserve assets, so-called “special drawing rights”, to leverage the bank’s lending by year-end.
“(If) you have five, you have enough critical mass to actually launch the process,” he said.
The IDB and the African Development Bank began a tour this summer to talk to governments after the IMF approved their plan in May. Goldfajn said the banks could turn every $1 dollar donated into $8 in lending.
The initiative is part of a push across multilateral development banks to boost lending without more direct donor cash.
While regulations mean European countries cannot sign on, Goldfajn said their treasuries could buy and sell the instruments once issued, providing crucial liquidity.
Goldfajn said the bank is also looking to increase its support for Haiti beyond the $150 million in grants it approved last year. Its lending portfolio, with $1.3 billion across 21 projects, was also continuing.
Haiti is “our most vulnerable country in the region, so it deserves our attention. We don’t have the luxury of saying this is too complicated, or we don’t have the luxury to say there is a security issue there.”
(Reporting By Libby George. Editing by Karin Strohecker and Christina Fincher)
