IMF Working Papers

Fiscal Buffers for Natural Disasters in Pacific Island Countries

Author/Editor:

Hidetaka Nishizawa ; Scott Roger ; Huan Zhang

Publication Date:

July 12, 2019

Electronic Access:

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Summary:

Pacific island countries (PICs) are vulnerable severe natural disasters, especially cyclones, inflicting large losses on their economies. In the aftermath of disasters, PIC governments face revenue losses and spending pressures to address post-disaster relief and recovery efforts. This paper estimates the effects of severe natural disasters on fiscal revenues and expenditure in PICs. These are combined with information on the frequency of large disasters to calculate the rate of budgetary savings needed to build appropriate fiscal buffers. Fiscal buffers provide self-insurance against natural disaster shocks and facilitate quick disbursement for recovery and relief efforts, and protection of spending on essential services and infrastructure. The estimates can provide a benchmark for policymakers, and should be adjusted to take into account other sources of financing, as well as budget risks from less severe as well as more frequent disasters.

Series:

Working Paper No. 19/152

Subject:

Access to Foreign markets Accounting Accounting standards Agriculture Aid flows Balance of payments Bank deposits Bank financing Banks Bonds Borrowing Budget estimates Budget execution Budget financing Budget reporting Budget support Budgetary policy Budgeting Budgets Capital Capital expenditure Central banking Central Banks Certificates of deposit Climatic changes Commercial banks Commodity prices Concessional aid Contingent liabilities Credit Crowding out Current expenditure Debt Debt burden Debt reduction Debt service Debt sustainability Developed countries Developing countries Development Development assistance Development planning Development plans Development policy Disaster aid Economic indicators Economic sectors Economies Emergency assistance Employment European Union Expenditures External borrowing Financial assets Financial assistance Financial infrastructure Financial institutions Financial markets Financial services Financial statements Financial systems Fiscal data Fiscal dominance Fiscal framework Fiscal indicators Fiscal policy Fiscal risk Fiscal space Fishing Foreign aid Government accounting Government expenditures Grants-in-aid Gross domestic product Health care spending Housing Inclusive growth Inflation Infrastructure Institutional framework Insurance Insurance companies International organization Investment Least squares Lines of credit Loans Money markets Multilateral development institutions Natural resources Nongovernmental organizations Official development assistance Pension funds Pensions Population Precautionary savings Private investments Private sector Production Provisioning Public debt Public financial management Public investments Public sector Public sector finance Public services Remittances Repatriation Retirement