Good morning. Honorable Prime Ministers, Ministers of Finance, Central Bank Governors, distinguished guests, ladies and gentlemen: it is my pleasure to welcome you to this important conference on Building Resilience to Natural Disasters and Climate Change in the Caribbean.
I only recently met with some of you in Bali, where, just before the Annual Meetings, a massive earthquake struck Lombok and another earthquake and tsunami struck the Indonesian island of Sulawesi, killing 2,000 people, injuring more, and destroying more than 70,000 homes. Japan was hit by a massive typhoon. Closer to home, Hurricanes Irma and Maria devastated parts of the Caribbean last year, causing so much destruction and suffering. And more recently, Hurricane Michael wreaked havoc on Florida.
These are repeated reminders that natural disasters carry no passport. No country is immune, no region is safe. In so many instances, the finger points to climate change—surely the greatest existential threat of our time. Just recently, the UN Intergovernmental Panel on Climate Change told us that the threat to our planet and its people is more grave than we thought.
As you all know so well, it is already making these disasters more ferocious, more frequent, and more frightening.
It is therefore crucial that countries live up to their Paris Agreement commitments, and move toward a fully decarbonized global economy over the next few decades. We must push forward with greater ambition, and resist any temptations toward backsliding.
Equally important is adaptation and strengthening resilience —which is why we are here today.
This has special resonance in the Caribbean region, which is on the front line of climate change. Its islands are among the top-25 most vulnerable nations. And their small size implies a big cost—disaster damage in the Caribbean is six times more than in larger states. Think about this. In the United States, Hurricane Katrina generated losses of US$160 billion back in 2005—about one percent of GDP. Compare that against Dominica in 2017 where damages after Hurricane Maria exceeded 200 percent of GDP.
It follows that building resilience to natural disasters and climate change in this region is a necessity, not a luxury.
Building Resilience in the Caribbean
As we see it, building resilience to disasters and climate change rests on three complementary pillars:
The first is securing structural protection, through resilient infrastructure; adequate land use, zoning rules, and building codes; and early warning systems.
The second is financial protection, through insurance or other risk-sharing mechanisms to reduce the cost of damage done by disasters when they occur.
The final pillar is emergency response, by ensuring rapid access to financing and contingency plans to help with recovery after a disaster.
Caribbean countries have, for sure, made some good progress in these areas—including by strengthening regional cooperation for rapid disaster response and creating the Caribbean Catastrophe Risk Insurance Facility.
But they can do even more, especially with regard to improving the resilience of public infrastructure and key economic sectors to natural disasters and climate change.
This kind of investment can deliver big gains for countries. Recent IMF research on ECCU countries estimates that investing in public capital resilient to natural disasters can increase potential GDP by 3-11 percent.
Despite the benefits, there are numerous reasons why these kinds of investments are lagging in the region.
On the domestic front, many countries in the Caribbean have high public debt and limited fiscal space. On the international front, the lion’s share of funding is for disaster assistance, not financing for adaptation. At the same time, cumbersome administrative procedures combined with capacity constraints complicate access to financing from climate funds. Political economy challenges have also played a role: governments sometimes shy away from long-term strategies that involve significant up-front costs with benefits that come much later.
An Alliance for Resilience Building
Against this backdrop, let me turn to what I think is needed to move forward—a collective effort to move the needle from an overarching focus on recovery following natural disasters toward building longer-term resilience.
In turn, this will require a new approach based on an alliance of all stakeholders, domestic and international, to mobilize the needed resources based on credible strategies.
Countries would take the lead —they would develop an umbrella Disaster Resilience Strategy, with input and support from the international financial institutions. The strategy will elaborate measures to get fiscal houses in order and to create fiscal space. It would also lay out a well-designed and fully-costed resilience building plan, including for risk transfer, which would be embedded in a sustainable multi-year macro-fiscal framework.
Such a strategy—integrating micro and macro reforms—would, in turn, need the support of the international community. Climate change, after all, is a global problem requiring global action. My hope is that this kind of strategy will generate the credibility needed to entice low-cost and grant financing from development partners, climate funds, and international financial institutions.
To operationalize this idea, I propose using two pilot countries for which supporting work is already underway, including a Climate Change Policy Assessment (or CCPA). During the course of today’s discussions, I hope that you will deliberate on this approach and help us formulate a way forward.
Before I close, let me turn to the role of the IMF in this. Let me assure you that you will always have a reliable friend and partner in us. We have several initiatives in train to support your efforts:
(i) We are helping build capacity and strengthen public financial management, to better manage fiscal resources and address disaster risks. The IMF’s Technical Assistance center in the Caribbean — CARTAC — has played a pivotal role in this effort. And I want to thank Marie-Claude and her government for Canada’s recent pledge to support the IMF’s capacity development globally, and especially through its support for the Caribbean, including for CARTAC;
(ii) We have launched, together with the World Bank, pilot Climate Change Policy Assessments to assess country preparedness and identify needed reforms;
(iii) In response to a request from the Governor of the ECCB, that was echoed by the G7, staff of the IMF and the World Bank have examined the scope for state-contingent debt instruments for Caribbean sovereigns. A note summarizing staff’s analysis has been circulated to conference participants. I am also told that draft term sheets from the International Capital Markets Association for various instrument structures are now available for interested sovereigns and investors; and
(iv) We have increased the annual access limits under our rapid credit facilities for countries hit by disasters.
We remain open to hearing your ideas on what more can be done, including in our lending toolkit.
I look forward to a fruitful discussion today and hope that it will give us some concrete proposals to jointly take forward.
For when it comes to natural disasters and climate change, we are all in this together.