Small States Confront Big Challenges with Natural Disasters and Climate Change

IMF Blog, December 22, 2016

Source details

Canonical URL: Small States Confront Big Challenges with Natural Disasters and Climate Change

Small states (economies with a population of less than 1.5 million) are far more vulnerable than other countries to natural disasters and climate change.
Many small states are located in high risk locations—zones subject to hurricanes, cyclones, and earthquakes (examples cited: Vanuatu, Samoa, Dominica, St. Lucia, St. Vincent and the Grenadines).
Three out of four small states are islands or widely dispersed multi-island states and are highly vulnerable to the rising sea levels associated with climate change.
Administrative capacity constraints: small countries tend to have less income and fewer public employees for risk management programs.
For large land-area countries, a disaster can severely impact one region but leave large parts of the economy untouched; for small islands, virtually all crops, housing, and other infrastructure can be destroyed, magnifying the disaster relative to the size of the economy and its resources.

On average, the annual cost of disasters for small states is more than four times that for larger countries, in relation to GDP.
The average annual cost of disasters for small states is nearly 2 percent of GDP.
Nearly one in ten disasters causes damage amounting to more than 30 percent of GDP, compared to fewer than one in a hundred for larger states.
The greater exposure to natural disasters worsens public finances, reduces investment and growth prospects, and increases poverty.
One-third of small states will be highly vulnerable to climate change within a generation.
Historical use of IMF disaster-related financing by small states: Dominica accessed these facilities four times over the period 2008-2015; Vanuatu tapped funds in 2015 following Cyclone Pam; Samoa borrowed from both the Rapid Credit Facility and Rapid Financing Instrument in 2009 and in 2013.

Recommended country-level actions:
- Identify and quantify key aspects that make them vulnerable.
- Invest in risk reduction infrastructure and projects.
- Develop contingency action plans and financing arrangements for risks they cannot avoid.
Macroeconomic policy roles:
- Design frameworks for managing the budget, public investments, and public borrowing related to disaster risk management.
- Mitigate carbon emissions through carbon taxation and energy subsidy reforms.
- Efficiently manage costly public risk reduction investments to adjust to climate change.
The IMF can share best practices and build policymakers’ capacity in these areas (example: Pacific Financial Technical Assistance Center work in Suva, Fiji).

When disaster strikes, countries have recourse to IMF financing: the Rapid Credit Facility and Rapid Financing Instrument provide quick access to financing following disasters; small states have already used these facilities.
The IMF is looking to further strengthen support to small states through these financing instruments.
Current annual borrowing limits for these facilities are small in relation to the disasters these countries can potentially face.
The IMF Executive Board recently indicated that it would consider higher access limits for countries subject to particularly large disasters starting in early 2017.
The IMF is ready to conduct pilot assessments of the macroeconomic aspects of climate change policies of small states to showcase policy efforts and improve access to global climate funding.
The IMF will continue to communicate and collaborate closely with the World Bank and other organizations with critical expertise on natural disasters and climate change.

Given the utter unpredictability of natural disasters, the IMF is committed to be agile in its response to members’ changing needs.

Tao Zhang — December 22, 2016

小型国家面临自然灾害和气候变化的重大挑战; IMF博客
- 小型国家面临自然灾害和气候变化的重大挑战; IMF博客 (Markdown version)
- 小型国家面临自然灾害和气候变化的重大挑战; IMF博客 (PDF)