## INVESTING IN RESILIENCE

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**Canonical URL:** [INVESTING IN RESILIENCE](https://www.imf.org/-/media/files/publications/fandd/article/2019/december/climate-change-and-investing-in-resilience-simison.pdf)

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### Overview
- Disaster-prone countries are shifting emphasis from relief and recovery toward preparation, adaptation, and resilience building to reduce human suffering and economic losses.
- International organizations encouraging this shift include the African Development Bank, the International Monetary Fund, and the World Bank.

### Recent events and impacts
- Tropical Cyclone Idai (March 2019) and Tropical Cyclone Kenneth (April 2019) hit Malawi, Mozambique, and Zimbabwe.
  - Combined death toll: more than 1,300 people.
  - Total damages from the two storms: $4 billion.
  - Almost 3 million people left without housing, electricity, or running water.
  - More than 800,000 hectares of crops were wiped out.
- Examples of severe historical impacts on small nations:
  - Hurricane Ivan for Grenada in 2004: damages amounted to 148 percent of GDP.
  - Hurricane Maria for Dominica in 2017: damages reached 260 percent of GDP.
- Dominica: population of 74,000; suffered damages equal to the country’s GDP in 2015 and damages equal to twice its GDP in 2017.
- Jamaica: nearly 300 years of recorded hurricane history; 17 named storms since 1951. Contingency fund: about J$2 billion ($15 million). Standby financing: $285 million credit line from the Inter-American Development Bank.

### Economic findings from IMF and related research
- United Nations Environment Programme estimate: costs of adapting to climate change in developing economies may range from $56 billion to $300 billion by 2030, or two to three times the currently available funding.
- IMF economists find investing in resilience may cut the costs of postdisaster intervention by at least half.
- A 2019 IMF working paper (Alessandro Cantelmo, Giovanni Melina, Chris Papageorgiou):
  - Ranks countries by probability of sustaining a natural disaster based on 20 years of data through 2017; identifies 34 most disaster-prone nations, mostly small or low-income countries in the Pacific or the Caribbean (top examples: Marshall Islands, St. Vincent and the Grenadines, Tuvalu, Micronesia, St. Lucia).
  - Finds natural disasters can cause damages totaling 50 percent of a country’s GDP.
  - Shows that on average the economies of disaster-prone countries grow by 1 percent less each year than those of non-disaster-prone countries because resources are diverted to recovery.
  - Suggests climate change may triple that growth gap.
  - Finds disaster-prone nations carry significantly higher public debt than non-disaster-prone countries.
  - Model result: “To eliminate the welfare losses from natural disasters via grants that finance the extra cost of resilient infrastructure, donors would have to disburse less than half the amount required to finance post-disaster intervention.”
- Other IMF work in Caribbean nations: investing in structural resilience would increase potential economic output by 3–11 percent, with a growth dividend of 0.1–0.4 percent a year.

### IMF three-legged approach to disaster resilience (consistent with fiscal sustainability)
- Structural adaptation
  - Strengthen roads, bridges, telecommunications, water supplies, and sanitation systems.
  - Example: Dominica developing a plan to improve infrastructure resilience by 2030; IMF estimates donor aid needed: $200 million.
- Postdisaster and social resilience
  - Contingency planning and investments to ensure efficient disaster response with minimal disruption to public services, sheltering, and relief distribution.
  - Example: Mozambique created a social registry after a 2016 cyclone and invested in stronger schoolhouses that function as community shelters.
- Financial resilience
  - Build fiscal buffers, arrange standby financing, and obtain disaster insurance and risk-transfer mechanisms.
  - Examples:
    - Jamaica: contingency fund ~J$2 billion ($15 million); $285 million credit line from the Inter-American Development Bank; use of Caribbean Catastrophe Risk Insurance Facility and consideration of a catastrophe bond.

### Programmatic examples and donor action
- African Development Bank approved a $100 million, four-year grant program to benefit 1 million people across Malawi, Mozambique, and Zimbabwe after Cyclones Idai and Kenneth.
  - Project components: improve agricultural productivity and resilience via upgraded irrigation systems and livestock practices; make infrastructure more storm-resistant; enhance early-warning systems and institutional/community disaster response capacity.
- Emphasis on telecommunications resilience: mobile-phone services are critical for early warning, crop planning, and access to financing in rural areas; strengthening telecoms to withstand catastrophic storms is important.

### Key policy implications and recommendations
- International aid is crucial because many vulnerable countries are unlikely to self-finance the higher costs of adaptation.
- Investing in resilience upfront is often more cost-effective than financing postdisaster interventions; donor grants financing resilient infrastructure may be less than half the cost of postdisaster relief.
- Countries should pursue the three-legged strategy—structural adaptation, postdisaster and social resilience, and financial resilience—while maintaining fiscal sustainability and seeking supportive international funding.
- Strengthening contingency funds, arranging standby financing, and using risk-transfer instruments (insurance, catastrophe bonds) should be prioritized alongside structural and social measures.

*Source: Bob Simison, Finance & Development, December 2019.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2019/december/climate-change-and-investing-in-resilience-simison.pdf_