Barbados is playing a leading role in an international effort to secure a major new financial lifeline if the island is hit by a climate-related disaster.
The Lifeline Fund, which Barbados and participating countries are aiming to jointly fund with US$500 million initially, would buttress the country’s existing disaster insurance and emergency financing arrangements by providing rapid financial assistance secondary to the existing multilateral system.
Central Bank Governor Dr The Most Honourable Kevin Greenidge, who is chairing the V20 Central Bank Governors Working Group that is leading the work to turn this idea into a functioning financial institution, called it a “groundbreaking” undertaking where those involved “are working towards initially capitalising the fund at US$500 million, with a longer-term objective of at least US$1.6 billion”.
“The intention is to create a substantial pool of financial resources that participating countries can access when climate shocks place pressure on their economies,” he told the DAILY NATION.
Key initiative
“This is a very important initiative, not just for Barbados but internationally. The Lifeline Fund is something quite groundbreaking. We are developing what would be the world’s first climate-focused, multi-regional financial arrangement, designed specifically to provide rapid financial assistance to countries experiencing economic and financial difficulties following climate-related disasters.
“It is being developed under the Climate Vulnerable Forum and V20, a grouping that now comprises 77 countries across the Caribbean, Africa, Asia, Latin America and the Pacific. These countries are among the most vulnerable to climate change, despite contributing relatively little to the problem.”
Greenidge explained: “The idea is relatively simple. When a hurricane or other major climate event strikes, countries can experience an immediate loss of foreign exchange earnings, increased import costs and pressure on their international reserves.
“Yet international emergency financing does not always arrive quickly enough. Lifeline is intended to provide rapid access to foreign currency financing so countries can stabilise their economies while recovering from the shock.”
The Governor was in Bangkok, Thailand, last week for the annual meetings of the International Monetary Fund and World Bank, where he chaired the sixth meeting of the V20 Central Bank Governors Working Group.
During the meeting, Barbados, Guyana, Bhutan, The Gambia, Ghana and Papua New Guinea signed a Statement of Endorsement, formally signalling their interest in helping establish the Lifeline Fund.
Greenidge said this was “another major breakthrough” and that other countries have indicated support, subject to their domestic approval processes.
The fund is not yet operational, with participating countries targeting April 2027 for signature of the founding treaty, after which the necessary legal, financial and institutional arrangements must be completed. All endorsements to date are non-binding and do not yet commit a portion of countries’ foreign reserves to it.
Greenidge saw significant potential benefits for Barbados, considering that “our economy is highly vulnerable to hurricanes and other climate events, particularly given our dependence on tourism and imports”.
“Having access to additional foreign exchange liquidity following a disaster would help protect our international reserves, support the stability of our exchange rate and ensure we can continue paying for essential imports during recovery,” he said.
“It would complement, rather than replace, our existing disaster insurance and emergency financing arrangements. Importantly, this is not a grant facility or a fund for direct payments to individuals. It is designed to provide repayable financing to countries facing external financial pressures following climate shocks.
“But there is also something much bigger here for Barbados. We are not simply participating in an international initiative designed by others. Through my chairmanship and the work of the Central Bank, Barbados is helping lead the development of an entirely new component of the international financial safety net. We are helping shape an institution that could eventually serve climatevulnerable economies across five regions of the world,” he noted.
“For me, what makes this particularly meaningful is that we are moving beyond simply calling for reform of the international financial system to actually helping build something new. Something designed by vulnerable countries, for vulnerable countries, that could make a real difference when the next major climate disaster strikes,” he stated. (CMC)