Harvesh Seegolam: Keynote address - UN Country Team Strategic
Retreat
Keynote address by Mr Harvesh Seegolam, Governor of the Bank of Mauritius, at the
UN Country Team Strategic Retreat, Balaclava, 4 April 2024.
* * *
The Hon Mr Naadir Hassan, Minister of Finance, National Planning, and Trade,
Republic of Seychelles
The Hon Mrs Marie-Celine Zialor, Minister for Youth, Sports, and Family, Republic
of Seychelles
The Hon Mr Justin Valentin, Minister of Education, Republic of Seychelles
The Hon Mr Flavien Joubert, Minister of Agriculture, Environment and Climate
Change, Seychelles
Ms Charlotte Pierre, British High Commissioner to Mauritius
Mrs. Lisa Singh, United Nations Resident Coordinator for Mauritius and Seychelles
United Nations Regional Directors
United Nations Heads of Agency
Members of the Diplomatic Corps in Mauritius and Seychelles
Distinguished Guests
Ladies and Gentlemen
Good morning.
It is a pleasure to be with you today at the 2024 United Nations Country Team Strategic
Retreat. I would like to thank you for inviting me to share a few thoughts on the topic of
Sustainable Development Goal (SDG) financing among Small Island Developing States
(SIDS), a topic of utmost relevance and importance for us here in Mauritius, as we chart
the way forward in an increasingly unpredictable global economic context.
Ladies and gentlemen,
Over the next fifteen minutes, I will contextualise the macroeconomic issues that SIDS
are subjected to, as these will form the basis of our discussions on scaling SDG
financing. Although SIDS are quite diverse, ranging from high-income to least
developed countries, they share inherent structural vulnerabilities due to their small
populations, geospatial remoteness, narrow resource base and susceptibility to climate
change and natural catastrophes.
The narrow resource base results in heavy reliance of SIDS on external markets for
goods. As a result, many SIDS grapple with heavy fluctuations in import and export
prices. In the current post pandemic context, these economic and financial
vulnerabilities have been amplified even further by macroeconomic factors. These
include global inflationary pressures, high fiscal deficits and public debt levels and
capacity limitations that restrict the ability of SIDS to scale domestic resource
mobilization, private finance and FDI opportunities towards Sustainable Development
Goals. Further, the impact of climate change has added to the financial quagmire of
many SIDS.
In fact, the pandemic had particularly disastrous consequences for SIDS in economic
and fiscal terms, most of which are largely dependent on international trade, external
finance and few key sectors, often tourism. In 2020, it was estimated that GDP of SIDS
dropped by 6.9 per cent versus 4.8 per cent in all other developing countries. In
Mauritius, we equally witnessed a major GDP contraction of around 15 per cent in
2020, one of the highest in the world I must say.
Ladies and gentlemen,
Against such precarious macroeconomic backdrop, we all agree that an effective
implementation of the SDGs is key to our development to achieve a more equitable and
sustainable future for all.
However, as most of you here may be aware, the UNCTAD reported that in 2022, SIDS
collectively received around USD 8 billion, representing 0.6 per cent of global FDI flows
and a 39 per cent increase from 2021. While this is certainly a step in the right direction,
it is still inadequate and disproportionately distributed as the top five SIDS recipients
received around 85 per cent of the inflows. The top five recipients were Dominican
Republic, Bahamas, Maldives, Jamaica and Timor-Leste. Among the five African SIDS ,
Mauritius saw its FDI flows grow by 48 per cent from 2021 to reach USD 625 million in
2022.
Climate funds were set up by developed nations to assist less-developed countries.
While these amounted to USD 35 billion, it is estimated that only some USD 11 billion
has been actually disbursed, with the share flowing to SIDS being even less significant.
SIDS are on the frontline of the climate emergency, bearing the brunt of more frequent
and intense extreme weather events, increasing temperatures and sea level rise, all of
which threaten people's livelihood and food security, with important ripples on economic
and financial stability.
These figures are disconcerting but more importantly, they emphasise the urgency of
the work ahead of us for removing potential obstacles to mobilise adequate SDG
finance. Allow me to illustrate with the case of Mauritius: to meet its climate obligations
by 2030 under the 2015 Paris Agreement alone, Mauritius requires funding estimated at
USD 6.5 billion, 35 per cent of which would be funded by the Government and domestic
private sector while the remaining 65percent or USD 4.3 billion would have to be
financed externally by 2030. This results in a yearly financing requirement of around
USD 700 million, which is no small feat.
There is no magic formula or one-size-fits-all solution when it comes to mobilising SDG
finance. Each country needs to muster its capital requirements in consideration of its
own local needs, capacity and priorities. However, in order to accelerate the momentum
of moving capital towards the SDGs, there are three key considerations:
FIRST, there is the need for a concerted and urgent effort by all stakeholders including
government, NGOs, financial institutions, regulators, academics, investors and even
consumers. By leveraging public-private partnerships, we can complement FDI inflows
through blended finance initiatives towards sustainable projects. In this vein, the
Mauritian Government is actively engaged in developing, under the National Vision
2030, investment opportunities that align with the objectives of the SDGs to attract
private capital to sustainable development needs.
SECOND is the imperative of incentivising domestic and international investors to
mobilise private financing into SDG projects by maximising the financial returns on such
investments. Project bankability is especially challenging for SIDS due to limited
technical expertise and access to natural resources which may explain why less than
one-third of the available climate funds has been disbursed so far to developing
countries and SIDS.
In this regard it may be helpful to seek technical and financial assistance from external
institutions like the World Bank, the IMF, the United Nations and the Agence Française
de Développement (AFD) to mention but a few. International banks must also develop
relevant instruments and vehicles that will attract private investors. In Mauritius, with
the expertise of international partners, two private companies were able to issue green
bonds in 2022 and 2023. The bonds are currently listed and trading on the Stock
Exchange of Mauritius (SEM). The SEM introduced the SEMSI in September 2015, a
sustainability index which evaluates the practices of listed companies based on ESG
criteria. To date, there are eighteen companies participating in this index. Some local
banks have also availed of external financing in the form of credit lines and guarantees
from institutions like the AFD for subsequent deployment as green/sustainable loans.
Ladies and gentlemen,
I will also say that for SIDS which are the stewards of some of the largest ocean
territories, the sustainable blue economy agenda could be transformative for national
development agendas. Blue bonds are emerging as an innovative way to fund ocean
and water-related solutions, create sustainable business opportunities, and signal
responsible ocean stewardship to the market. I would invite all SIDS to give due
consideration to the opportunities that can be untapped through such issuances.
The THIRD key aspect is the building of robust regulatory frameworks that enhance the
resilience of the financial system and increase the credibility of the SDG strategies and
products being offered. As I iterated earlier, SIDS tend to have structural vulnerabilities
that make them more susceptible to external shocks.
It is therefore primordial to have the right policies in place to preserve monetary and
financial stability and thus boost public confidence and facilitate capital flows across the
financial system. In addition to maintaining a resilient and credible financial system,
SIDS central banks may also be strategically positioned to promote the growth of
domestic climate financing through enhanced risk and opportunity discovery by working
towards improving climate information architectures and climate finance market
structures.
Ladies and gentlemen,
When it comes to the climate agenda, the Bank of Mauritius has taken the lead in
facilitating an enabling environment for the development of sustainable finance across
Mauritius. The reality is that SIDS generally, have less developed financial markets
which makes raising funds on the international markets difficult. SIDS equally face the
challenge of rating agencies actions. As you are aware, rating agencies play a vital role
in generating trust and confidence in debt instruments beings issued by sovereigns in
the private sector.
In Mauritius, we have given due consideration to these challenges and have invested
ourselves in developing the right eco-system to accompany the development of
SDGfinancing. This adds to the fact that Mauritius is rated by both Moody's and S&P as the
only investment grade IFC in Africa. The banking sector in Mauritius also continues to
play a pivotal role in attracting international investors. At the level of the Bank of
Mauritius, we have left no stone unturned when it comes to further modernising the
banking sector and its offerings to compete in international markets for sustainable
finance.
Starting in June 2020, the Bank engaged with financial institutions to create awareness
of climate-related risks as well as opportunities from the transition to net-zero. In July
2020, the Bank joined the Network of Central Bank and Supervisors for Greening the
Financial System (NGFS) to widen its collaboration with other central banks regarding
sustainability-related research and technical resources.
In June 2021, the Bank of Mauritius published a guide on the issuance of sustainable
bonds which aims to ensure the integrity of the sustainable finance ecosystem in
Mauritius and prevent greenwashing. The guide recommends that the bonds be aligned
with international standards such as the Green Bond Principles of the International
Capital Market Association and the International Climate Bonds Standards of the
Climate Bonds Initiative.
In October 2021, the Bank set up a Climate Change Centre (CCC). The Climate
Change Centre acts as a focal point for addressing the macroeconomic implications
linked to climate-related and environmental financial risks by integrating such risks into
our regulatory, supervisory and monetary policy frameworks. With a view to further
consolidating the appeal of Mauritius for international sustainable finance investors, the
Climate Change Centre has also collaborated with the Government and other key
stakeholders on a number of projects.
These projects include amongst others the development of a nation-wide ESG
framework for issuing green and blue bonds, and collaboration in view of the
elaboration of a National Green Taxonomy to provide a common framework for
investors wishing to invest in sustainable goods and services. Currently, the Climate
Change Centre is also working with international partners to develop a high-integrity
carbon trading framework for both blue and green credits. All of these initiatives aim to
promote a resilient and credible sustainable finance ecosystem in Mauritius and through
the Mauritius International Financial Centre in the region.
I am pleased to report that the work of the Climate Change Centre over the past three
years is on the right track as demonstrated through a 64 percent increase in bank
exposures towards sustainable projects, and a 53 percent increase in loan applications
for sustainable project financing over the period June 2022 to June 2023 as per the
survey conducted by the Bank in 2023.
Ladies and gentlemen,
Like most SIDS, we have much work in front of us to bridge the SDG-financing gap. We
have started this journey and are going in the right direction. However, to reach our
destination, it is important that we continue to develop collaborative partnerships,
incentivisation strategies and credible architectures that will help maximise our full
potential for mobilising SDG finance.
We have the responsibility towards the future generations who will judge us by the
quality of legacy we shall bequeath to them. Our actions will impact generations to
come and may be irreversible. In this labyrinth of shocks-actions-reactions that is eerily
reminiscent of a snakes-and-ladders game of grand scale, we have the moral compass
of convincing our future generations that we did everything we could since timing is of
essence.
I therefore call on all of you to do your utmost best in contributing to build a sustainable
and resilient SDG friendly financial system.
Before I end, I will equally suggest that like-minded SIDS come together to reflect on
the challenges and also share expertise and learnings on this journey. Central Banks of
SIDS can undoubtedly begin with this collaborative approach. On this front, I would
suggest that the Bank of Mauritius and the Central Bank of Seychelles set the tone.
Other central banks from the SIDS region may subsequently join us in the process.
Ladies and gentlemen,
We need to act now and we need to do it smartly.
With these words, I thank you for your attention.