#Kingston, July 13, 2019 – Jamaica – The Government is putting strategies in place to better plan for and finance damage and losses resulting from natural disasters. Among the measures is implementation of the public financial management policy for natural disaster risk, which will provide the country with funds in the event of a disaster.
It will include, among other things,
accumulating fiscal savings in the Contingencies Fund and making contingent
credit available in the event of a disaster; and implementing financing
strategies such as catastrophe bonds or catastrophe-linked insurance.
“The idea is to have available to
Jamaica, up to US$1 billion of non-budgetary emergency funding that can be
available in the worst possible event and that is the strategic intent, the
strategic direction,” explained Minister of Finance and the Public Service, Dr.
the Hon. Nigel Clarke.
He was speaking at the launch of the
website for the Seventh Regional Platform for Disaster Risk Reduction in the
Americas and the Caribbean 2020 at the Spanish Court Hotel in New Kingston on
July 10.
The Minister, in highlighting the
importance of the policy, said that Jamaica’s pursuit of economic independence
requires an institutional response to the financial risk of natural disaster. He informed that earlier this year, the
Government transferred a sum of $2 billion into the
Contingencies Fund towards natural disaster risk coverage.
This
is in keeping with a resolution moved by Dr. Clarke in Parliament in March to
raise the ceiling of the Fund from $100 million to $10 billion.
The
Contingencies Fund is provided for in Jamaica’s Constitution and was
established under Section 13 of the Financial Administration and Audit Act to
provide for unforeseen expenditure of any kind.
“The idea is, you put the fiscal savings
aside on an annual basis as you can afford. You invest it prudently and you do
so in markets that provide some degree of diversification from the risk that you
are trying to protect yourself from, and you only draw down in the event of
natural disaster.
“When you draw it down… it is through a
budgetary process, so there is transparency on the drawdown itself and on how
those funds are being used,” Dr. Clarke explained.
He further pointed to the Caribbean Catastrophe Risk Insurance Facility, which he noted “has the
capacity to pay out significant sums if we have an event that triggers it”.
He noted, too, that
Jamaica renegotiated last year with the Inter-American Development Bank (IDB) for
a $285-million contingent credit claim.
In addition, he said
that the Government is working with the World Bank to develop a catastrophe bond
that will generate additional funding “to protect Jamaica from the worst
possible natural disaster event… that can derail our fiscal trajectory”.
Dr. Clarke explained that the bond is an investable capital market
instrument that will provide the Government with access to the resources that
may be needed, in return for annual premium payments. He noted that development
of the bond requires a lot of “detailed modelling”, and the World Bank is providing
technical support in this regard.
“I can say that our
strategic efforts in this area have met on fertile ground… and I fully expect
that they (World Bank) will assist us in this regard, with us obviously having
some skin in the game and using some of our own resources to pay the premiums
that are involved,” Dr. Clarke said.
Jamaica will host the Seventh Regional
Platform for Disaster Risk Reduction in the Americas and the Caribbean from
July 8 to 10, 2020 at the Montego Bay Convention Centre in St. James, under the
theme ‘Building Resilient Economies in the Americas and the Caribbean’.
Contact: Chris Patterson
Release: JIS
Photo Caption: Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke.
Photographer: Garwin Davis