Disaster Risk Financing Instruments Update

  • The Office of the Minister of Finance and Public Service has highlighted that the Government of Jamaica (GOJ) has strategically put in place a multilayered set of financial instruments to pre-finance the emergency response and recovery costs of natural disasters. Although not all storms will activate every instrument, the concept is that the nation should have the capability to utilise some instruments' resources for each storm.
  • As such, the preliminary and anecdotal assessments of the damage suggest that the GOJ will need to utilize all available resources from the first two layers: the Contingency Fund and the Natural Disaster Fund, which together amount to $4.5Mn.
  • The Office also emphasized the possibility that the country may need to tap into an additional layer of funding, which includes a Contingent Credit Claim with the IDB. Although the maximum available under this layer is roughly $46Bn, it will require a few days to determine precisely how much will be activated by Beryl and the amount necessary.
  • “Regarding the top layer in our disaster risk framework, the path and intensity of Hurricane Beryl did not trigger Jamaica’s Catastrophe Bond, which essentially serves the purpose of providing financial protection against a Category 5 or very intense Category 4 hurricane making landfall in Jamaica.” In addition to the above, the GOJ has a $140Bn precautionary and liquidity line (“PLL”) with the IMF. The PLL is intended for countries with strong fundamentals and can be drawn in the event of liquidity problems that emerge from natural disasters or economic shocks.
  • While it is too early to rule anything out, the Office does not anticipate that Hurricane Beryl has led to, or will lead to, liquidity issues for the GOJ. At the current time, the facility is unlikely to be drawn.

(Source: JIS)