Barbados, the Caribbean nation whose prime minister, Mia Mottley, has championed the argument that small and developing countries desperately need debt relief and funding if they are to survive climate change, has reached an agreement with the International Monetary Fund that will make it among the first recipients of money from a new $45 billion resilience trust.
Under the program, Barbados is set to receive $183 million for climate-focused spending. It’s money that Avinash Persaud, Mottley’s top economic adviser, tells ProPublica will be used to replace segments of the island’s drinking water system and to shore up its supply of fresh water in the face of climate-driven drought. Barbados’ current water infrastructure was built by the British more than a century ago and loses about half of the water it carries. “This will go a significant way towards helping us start that project,” Persaud said. “These are not sexy things, but they are very important things in a world of climate change.”
The IMF has announced a similar agreement with Costa Rica for $710 million and has told ProPublica that another agreement with Bangladesh may soon be announced.
The trust funds are technically a loan, offered at low or “concessional” interest rates, to be paid back over 20 years after a grace period of a decade. The agreement is pending approval by the IMF’s board in the coming weeks. The money for Barbados is being paired with a $110 million IMF loan to support Barbados in continuing to reduce its debt and restructure its economy.
The announcement comes three months after an investigation by ProPublica and The New York Times examined how the high debt burden carried by small island nations made it impossible for them to pay for programs to defend against climate catastrophe. The investigation found that the IMF over decades had been slow to support Barbados’ climate initiatives as well as those of neighboring countries. Instead, the powerful global institution routinely used its leverage to impose strict economic criteria for financial health that wound up forcing countries like Barbados to spend money they might have used for infrastructure and other improvements to repay foreign banks and investors instead.
The story also pointed to the role of the World Bank, which funds development projects in needy nations, but which had designated Barbados and other Caribbean countries ineligible for aid because they were not poor enough. The World Bank’s president, David Malpass, appointed by former President Donald Trump, has come under fire in recent weeks for refusing to acknowledge that fossil fuels have driven global warming, stating that “I am not a scientist.”
Barbados’ leaders have been leaning hard on the IMF and the World Bank for greater access to concessional loans so that the government could invest in advance of disasters in more sustainable systems, thereby avoiding damages in the first place. “Giving us temporary access to funding when the disaster hits is just too late,” Persaud said. “It’s like paying for the undertaker.” The sort of investment the new trust helps make possible can pay back seven-fold in avoided costs when disaster does strike, but only “if we can invest today,” he said.
When the IMF first announced its intention to establish a resiliency trust in May, the plan had been criticized as not being specifically targeted for climate threats. It was also dismissed as not being large enough to address the needs of small countries. Its total is roughly one-tenth of what the United Nations estimates developing countries will require to fund climate programs each year.
An IMF spokesperson told ProPublica that the money from the trust can never be enough to meet the urgent burden that the fund now says Barbados and countries like it face from climate change, but that the program can help and may catalyze private investment. “We’re there and engaged,” the spokesperson wrote in an email. “Others will have to follow.”
Although Barbados plans to spend some of the money on its water infrastructure, the trust is not earmarked for specific projects and can aid the country’s broader climate agenda. It is different from World Bank funding, which often pays for specific projects. The push for investments in infrastructure and resilience that Mottley has argued for is distinct from the question of whether the world’s wealthiest and most developed nations that have caused climate warming will pay for the enormous losses that warming is now imposing on poor countries. That question is expected to be a focus of the upcoming COP 27 climate conference in Egypt in November and has taken on new urgency after climate-driven floods destroyed much of Pakistan last summer.