Measures in Place to Fund Emergency Costs Associated with Natural Disasters

The Government has put in place measures for the funding of emergency costs associated with natural disasters that involve billions of dollars.

Speaking at the 54th annual monetary studies (AMS) conference at the Bank of Jamaica’s auditorium in downtown Kingston on November 1, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, said the suite of products are essential to the country’s disaster framework and enables the Government to respond to multibillion-dollar emergency costs associated with natural disasters.

“We have a natural disaster fund; we have a contingency fund and together they have about $5 billion. We have a credit contingent claim with the IDB for over US$285 million, that’s over J$40 billion,” the Minister said.

“We have the Caribbean Catastrophe Risk Insurance Facility, which provides limited coverage for earthquake, excess rainfall, and we have something for tropical cyclones, and then on top of that, Jamaica became the first small island State in the world to independently sponsor a catastrophe bond, which is US$185 million or approximately J$30 billion,” he added.

He said the earthquake that impacted the island on October 30, “brought home the need for us to make sure that we don’t wait for a disaster to start planning how we are going to finance the emergency costs that come out of it”.

Dr. Clarke pointed out that the multilayered approach involving significant resources and pioneered by the Government helps to ensure that the country can finance emergency costs associated with natural disasters.

“Those are the costs that you can’t defray, the ones that can take a fiscal programme off track because you have no choice but to address them. What we want to do in our disaster framework is to have financial products that give the Government the capacity to respond to emergency costs of natural disasters, and Jamaica is pioneering that in the region, indeed in the world, by having a suite of products that can increase the capacity of the Government,” the Minister said.

“We must include other products and we must continue to capitalise our natural disaster fund and our contingency fund to ensure that Jamaica is not left to the mercy of donors after the fact, in the event of a natural disaster,” he added.

Meanwhile, he said small island States such as Jamaica should incorporate considerations of climate change into their financial policy.

“We are operating in an era where climate change is a reality, temperature rises are real and those temperature rises lead to sea-level rises, which affect island States like ours. We have to incorporate considerations of climate change into financial policy, into financial-sector policy and even into fiscal policy, and Jamaica is well positioned in that regard,” the Minister said.

“Our 2030 action plan that was tabled in 2009, recognises climate change as a legitimate area that ought to influence national policy. We have a National Adaptation Plan that is to be finalised, and the Central Bank is collaborating with multilateral institutions to find the best way to incorporate climate change considerations in disclosure requirements for financial institutions and in finding ways to stress-test according to climate-change criteria,” he added.

Highlighting the significance of the conference, Governor, Bank of Jamaica, Richard Byles, said the sessions will focus on six main areas – developments in regional and global financial markets, climate change and recovery, macroeconomic vulnerabilities, fiscal sustainability, financial stability and inclusive and resilient growth.

He said it is only through rigorous research and analysis “that we can navigate these complexities and make informed decisions”.

“The past three years have been challenging for all of us, the global pandemic has forced us to adopt new norms and has challenged even conventional thinking on monetary and fiscal policies. You will notice, we have deviated somewhat from pure policy and included two sessions devoted to fintech and digital finance, issues that have become very relevant to our financial institutions,” the Governor said.

The Governor argued that conferences such as the AMS play a pivotal role in advancing the understanding of complex economic issues and help to shape economic policies in the region.

“They also provide platforms for intellectual exchange and collaboration of economists and practitioners… and are critical, particularly when they are held in person for fostering networking and building social bridges,” he said.

Meanwhile, Dr. Clarke congratulated the Bank of Jamaica and the Caribbean Economic Research team for hosting the conference.