Download Fiscal Risks Related to Catastrophes in the Caribbean

Fiscal Risks Related to
Catastrophes in the Caribbean
Source: Germanwatch, 2012
Niels Holm-Nielsen,
Lead Disaster Risk Management
Specialist, World Bank
Average losses due to extreme weather events for Selected
Caribbean countries from 1992-2011
Average Annual Losses per GDP (%)
10
5
0
1.5
(1)
Grenada
(8)
(4)
Dominica
(52)
(5)
St. Kitts & Nevis
(43)
(7)
Belize
(19)
(8)
AB
(14)
(15)
St. Lucia
(26)
(20)
Guyana
(128)
(30)
Jamaica
(73)
(33)
St. Vincent
(33)
(53)
DR
(5)
Suriname
(141)
(169)
•
•
Deaths per 100,000 inhabitants
0
() indicate Global Rank of 183 countries or territories evaluated.
Sorted by Losses per GDP (%)
Source: Harmeling, S. and Eckstein D. “Global Climate Risk Index 2013”. Germanwatch, November 2012. http://germanwatch.org/fr/download/7170.pdf
3
Losses from disasters are fiscal shocks, which often result in
budgetary deficits & increased debt
Select Damages from Disasters as a % of GDP
200%
Hurricane:
Ivan
Hurricane:
Hattie
Hurricane:
Georges
Hurricanes:
David & Frederick
Hurricanes:
Luis &
Hurricane:
Marilyn
Luis
Hurricane: Hurricane: Hurricane:
Luis
Allen
Gilbert
100%
Flood
Hurricane:
Tomas
Guyana 2005
St Lucia 2010
0%
Belize 1961
Dominica - St Lucia 1979
1980
Jamaica 1988
AB - 1995 Dominica - St. Kitts & St. Kitts & Grenada 1995
Nevis Nevis 2004
1995
1998
Disaster events are increasing as are disaster losses
Count of Disasters
Damages from Disasters
(US$ millions)
75
Suriname
$4,000
Suriname
St. Kitts & Nevis
50
St. Vincent
Grenada
St. Lucia
Guyana
Dominica
AB
Dominica
25
$2,000
AB
Belize
St. Vincent
Guyana
St. Lucia
St. Kitts & Nevis
Belize
Grenada
Jamaica
0
DR
1961 1970
1971 1980
1981 1990
1991 2000
2001 2010
Souce: EM-DAT
$0
Jamaica
1961 1970
1971 1980
1981 1990
1991 2000
2001 2010
DR
Souce: EM-DAT
The Financial Markets Are Watching
• “Exposure to natural hazards might influence
the analysis of all categories that constitute
the skeleton of the sovereign credit analysis:
political risk, economic structure and growth
prospects, fiscal flexibility, monetary flexibility,
and external finances.”
Financial Policy Options
for Disaster Risk Management
Assess and quantify risks
Define and measure contingent liabilities
Pre-Disaster
Assess Risks
Reduce contingent liability
Reduce disaster impact through
integrating risk information in public
investments
Reduce economic impact by
creating incentives for
private sector resilience
Integrate disaster risk in fiscal risk
and public debt management
Reduce
Financial Risk
Improve post-disaster budget
response capacity
Secure Financing
Deploy and Monitor
Funding
Post-Disaster
Establish effective administrative systems
for post-disaster approval, transfer and
monitoring of funds
Clarify post-disaster financial
assistance
Quantifying your Contingent liability
Hazard
(probabilistic)
(Potential)
Physical
Damage
Vulnerability
Direct (Potential) Loss
Estimation
(probabilistic)
% Damage
Exposure
% Damage
Economic
Hazard intensity
Human
Funding Needs
Quick liquidity vs. long term financing
Risk-layering approach
Three things to remember
• For most Caribbean countries, natural
disasters represent a significant contingent
liability.
• Disaster losses in most Caribbean countries
have increased faster than economic growth
in the past three decades.
• Ministries of Finance should quantify, analyze
and manage this contingent liability.
Including disaster risk within an comprehensive
risk management framework
Disaster Risk
Management
Fiscal Risk
Management
Disaster Risk
Financing and
Insurance
(commodities, currency and
others)
Public Debt
Management
Actionable ideas
• Ask your technical line ministries and/or
development partners to help you quantify
your catastrophe contingent liabilities.
• Create a disaster risk financing strategy
• Strengthen your emergency budget
appropriation systems to ensure appropriate
targeting, accountability, speed, and
transparency in budget execution in the
aftermath of a disaster.
Possible World Bank Support to Caribbean Countries
• Technical assistance and strategic advice to Ministries
of Finance for Catastrophe Risk Financing (grant
financed)
• Climate and disaster vulnerability reduction (IDA, IBRD,
and Climate Investment Fund)
• Support for creation of insurance solutions for risk
transfer (like the CCRIF)
• Contingent line of Credit for rapid disbursement
following a catastrophe (IBRD)
• Contingent Components imbedded in Investment
operations to finance possible disaster recovery (IDA)
• Emergency recovery financing (IBRD or IDA)