Lisbon, July 2, 2024 (Lusa) - The fund that will speed up Cabo Verde's debt swap with Portugal will focus on water, sanitation and energy, and could grow to €140 million, the African country's National Planning Director said on Tuesday.
"The Environmental Climate Fund (FCA) will finance investments in green projects and, if we do well with the €12 million, we'll evaluate the implementation so that we can implement the remaining amount of the debt in this model, which totals around €140 million," said Gelson Pina, speaking to Lusa on the sidelines of the first Energy and Climate Seminar, which took place at the headquarters of the Community of Portuguese Language Countries (CPLP) in Lisbon.
Cabo Verde and Sao Tome and Príncipe signed an agreement with Portugal so that part of these countries' debt is channelled into a climate investment fund, in a model in which payments to Portugal are returned to these countries as long as they are applied to green investments and climate change adaptation and mitigation.
"It's not really debt forgiveness, because we're still paying the debt service; instead of sending the money to Portugal's Treasury, the amount is made available as a donation for Cabo Verde to make investments in projects selected and carried out by Portuguese and Cabo Verde's companies, which execute the amount," explained Gelson Pina.
"If we do well with the €12 million [included in the initial agreement between the two countries], we'll assess the implementation of the remaining part of the debt, which in total is €139 or €140 million, in addition to the commercial debt to CGD and BPI, which is also endorsed by the Portuguese government," he added.
"We're also going to assess the best way to choose other areas, this is an experiment and we're going to learn the lessons of the project and then apply them up to €140 million," said Gelson Pina.
The government bill creating the Environmental Climate Fund has already been sent to Cabo Verde's Parliament and should be approved "in the next few weeks", he said, pointing out that the aim is for this amount to be applied by the Fund by the end of next year.
"The FCA will be created in the next few weeks and by the end of 2025 we'll be investing the €12 million in two major areas, water and sanitation, and energy," said Gelson Pina.
Asked which specific projects will be funded, the government official replied: "These are the two major investment blocks, but we're going to implement and have a wider group of projects, with other areas of climate investment that will be included in this fund from other partners and other types of green funding, such as the International Monetary Fund's (IMF) Resilience and Sustainability Facility (RSF) of €32 million, which will be allocated to the CAF."
Desalinated water and solar energy are two priority areas for Cabo Verde, and the project aims to "use solar energy to produce desalinated water, initially in Santiago, but the larger project will cover the entire archipelago," he concluded.
Portugal has agreed with Cabo Verde and São Tomé and Príncipe on bilateral debt relief in exchange for climate investments of the same value, with the agreement signed with Cabo Verde totalling €12 million and Sao Tome and Príncipe €3.5 million.
The idea, which is acknowledged to be extended to other Portuguese-speaking countries in Africa, is to set up an international fund, in the case of Cabo Verde, and a national fund, in the case of Sao Tome and Príncipe, into which Portugal will channel the amount paid by the two countries, a mandatory procedure so that there is no debt forgiveness or restructuring, from a financial point of view, which could lead to downgrades in the rating and in investors' assessment of the countries' credit quality.
MBA/ADB // ADB.
Lusa
