Gov't to pursue strategies to reduce Ja exposure to natural disasters
Finance and Public Service Minister, Dr Nigel Clarke, has announced that the government is taking steps to ensure that the country is able to withstand the effects of natural disasters in the post-International Monetary Fund (IMF) era.
Jamaica ended its borrowing relationship with the IMF in 2016 and entered into a precautionary Stand-by Arrangement with the multilateral that will end in 2019.
But, like the rest of the region, Jamaica is vulnerable to natural disasters and the country is often forced to find billions of dollars to recover from devastating hurricanes. This often places significant pressure on the national budget.
Dr Clarke said he is determined to change this.
“Jamaica has done too much work and made too many sacrifices to leave us completely exposed in a post-IMF-programme environment, to the potential fiscal impact of natural disaster,” Clarke said on Thursday as he opened the 2019-2020 Budget Debate in the House of Representatives.
“The pursuit of economic independence requires an institutional response to the financial risk of natural disaster,” Clarke added.
He said it was for this reason why the government will be pursuing a strategy that provides several layers of protection.
1. The accumulation of fiscal savings in the Contingency Fund provided for in the Constitution and which can only be used in the event of natural disasters.
2. Contingent credit will be available in the event of a natural disaster.
3. The Caribbean Catastrophe Insurance Facility.
4. Catastrophe bonds or catastrophe-linked insurance will be put in place.
In making the case for stronger systems to be established to minimize against the effects of natural disasters on the economy, Dr Clarke argued that even with a stronger central bank and a credible fiscal council, “mother nature could intervene and undermine our efforts.”
“Like much of the region, Jamaica is vulnerable to natural disasters. While events on the scale of Hurricane Gilbert occur only once every several decades, the data show, and our experience suggests that higher frequency events regularly cost Jamaica,” said Clarke.
He pointed out that natural disasters result in unplanned public expenditure or the reallocation of already committed financial resources for reconstruction, rehabilitation and repair.
“Budgetary revenues also fall in natural disasters, central bank reserves come under pressure, and the need to borrow increases,” the finance minister stated.