Maldives Turns to Debt-for-Nature Swap to Preserve Coral Reefs

The Maldives is planning a debt-for-nature swap to allocate funds towards conserving coral reefs, mangroves, and seagrass. This method exchanges existing debt for cheaper loans to finance environmental projects. They’ve partnered with The Nature Conservancy as they face significant debt challenges, including a maturing sukuk by 2026.

The Maldives, known for its stunning natural beauty, is pursuing a debt-for-nature swap, according to Environment Minister Thoriq Ibrahim. The initiative aims to channel funds into preserving coral reefs, mangroves, and seagrass as the island nation strives to safeguard its natural assets.

This approach, increasingly popular with financially burdened countries, involves swapping existing debt for more manageable loans, often supported by multilateral lenders. Ibrahim revealed at the COP29 U.N. climate talks that the country has begun assessing the value of its coral reefs, with plans to evaluate mangroves and seagrass, forming the foundation for their conservation efforts.

An agreement was signed recently with The Nature Conservancy, renowned for facilitating debt swaps from Indonesia to Belize. Amid dwindling foreign reserves, there is concern that Maldives may become the first to default on Islamic sovereign debt, highlighting the urgency for financial restructuring.

(With inputs from agencies.)