THE international credit rating system is forcing climate-vulnerable countries, such as Fiji, to pay far higher borrowing costs than wealthier nations, despite their urgent need for affordable climate finance.
This concern was raised at COP30 by Permanent Secretary for Environment and Climate Change, Dr Sivendra Michael, during a panel discussion on Healthy Debt on a Healthy Planet.
Dr Michael highlighted the challenges Fiji faces in accessing international debt markets and the need to rethink financial instruments for climate-vulnerable nations.
“I really wanted to bring to your knowledge what was around debt structuring,” Dr Michael said.
“It’s really important that we have these conversations when we are looking at debt instruments like debt swaps for nature or bonds.”
He pointed to Fiji’s pioneering efforts, noting that the country was the first in the world to issue green bonds in 2017 through the London Stock Exchange and the first to issue blue bonds domestically.
“Why domestically? Because the international credit rating system will not allow us to issue these bonds internationally.
“Countries like Germany and the Netherlands borrow at much lower interest rates, while climate-vulnerable countries like Fiji face higher costs.
“It’s unjust.”
Dr Michael traced this system back to the Bretton Woods framework of the 1940s.
He called for collaboration with multilateral development banks and other partners to explore new mechanisms, such as debt-for-nature swaps, and to reform the way international credit ratings are applied to vulnerable countries.
“We need to bring the right partners to the table to talk about these issues around where we go from here.
“We haven’t tried it. We need the right partners to try and explore that.”
Minister Bulitavu champions climate action
EVEN though Pacific island nations like Fiji are extremely vulnerable to climate change, they are still taking a leadership role.
Minister for Environment and Climate Change Moses Bulitavu said this during COP 30 at the Baku Hub Annual High-Level Dialogue, while highlighting the multiple climate threats facing Fiji, including rising seas, flooding, droughts, and cyclones, which are already affecting water and food security, displacing communities, and threatening human rights.
“Despite our acute vulnerabilities, the Pacific is leading, both internationally and at home,” Mr Bulitavu said.
“Earlier this year, Pacific Leaders endorsed the Ocean of Peace Declaration, an initiative first proposed by Fiji’s Prime Minister, Honourable Sitiveni Rabuka, in 2023.
“The Ocean of Peace is our shared vision for the Blue Pacific, a commitment to safeguard our ocean, our people, and our future.”
Mr Bulitavu said it (Blue Pacific) also emphasised the Pacific Way, a commitment to resolving disagreements through dialogue, cooperation, and mutual respect.
He said the Ocean of Peace underscored the region’s environmental stewardship and the collective responsibility to confront the climate crisis, which Pacific Leaders have identified as the single greatest
threat to the region’s existence, security, and well-being.
“Fostering peace-positive climate action means embedding the oceanclimate nexus more deeply within the UNFCCC process, through embedding the ocean as a formal agenda item; establishing financial mechanisms for ocean-based adaptation; and recognising the loss and damage dimensions of ocean degradation.”
At home, he said Fiji was implementing policies to address climate displacement, a pressing reality for many communities.
Borrowing can ‘strengthen climate resilience’
CITIZENS need to shift their mindset about borrowing; it is not a sign of weakness, but a strategic tool.
This was the message from the permanent secretary for the Ministry for Environment and Climate Change, Dr Sivendra Michael, during a panel discussion on Healthy Debt on a Healthy Planet: The 4P Implementation Pathway on the Debt, Nature and Climate Nexus at COP30 in Brazil who pointed to Fiji’s recent success in securing a concessional financing package from the Climate Investment Fund for Nature, People and Climate as an example of how responsible borrowing can benefit the nation.
Dr Michael said borrowing has long been viewed negatively, but it is important for people to understand that when managed responsibly and secured on concessional terms, it can enable Fiji to strengthen its
climate resilience and drive sustainable development.
“We need to have a paradigm shift in thinking amongst our citizens, amongst our people,” he said.
“Yes, economic development is important.”
He explained that Fiji secured this access despite not qualifying for a full grant as an upper-middle-income country.
To achieve this, Fiji presented a case to the fund’s board under the IDA-BLEND window financing, highlighting the country’s climatevulnerable profile and using evidence from studies by the World Bank
and the IMF.
As a result, the fund’s governance board agreed to provide financing on a 50 percent loan and 50 percent grant basis.
“The loan component carries highly concessional terms, an interest rate of 0.75 per cent, with a 10- year grace period and a 40-year repayment term.
“And it is this success that demonstrates the importance of using data and research to leverage financing and determine when grant or loan components are most effective.”
He also highlighted the potential for other instruments, such as the World Bank’s Pro-Green and Pro-Blue programs, to co-finance future projects.
“It’s really important for our citizens to understand that borrowing is needed.
“But borrowing is needed for those who are manageable and those who have terms and conditions that are looking at concessional and highly concessional rates.”
