Investing in Resilience
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- Authors: BOB SIMISON
- Published: December 1, 2019
Overview
- Journalist Bob Simison reports on how disaster-prone countries are strengthening their ability to withstand climate change events by investing in resilience.
- International organizations encouraging preparation and adaptation include the African Development Bank, the International Monetary Fund, and the World Bank.
- Opinions expressed are those of the author and do not necessarily reflect IMF policy.
Recent disaster impacts and needs
- Tropical Cyclone Idai (March 2019) and Tropical Cyclone Kenneth (April 2019):
- killed more than 1,300 people.
- brought total damages from the two storms to $4 billion.
- left almost 3 million people without housing, electricity, or running water.
- wiped out more than 800,000 hectares of crops.
- The United Nations Environment Programme estimates the 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 that investing in resilience may cut the costs of postdisaster intervention by at least half.
Case studies and country actions
- Bahamas:
- Blueprint for building coastal resilience after Hurricane Dorian; investing in coastal forests, mangroves, reefs, and seagrasses to provide protection that seawalls and jetties can’t while costing less.
- Malawi, Mozambique, Zimbabwe:
- Pursuing a “build-back-better approach” for roads, rails, and ports; restoration of agricultural livelihoods; and promotion of resilience to climate shocks following back-to-back cyclones.
- Malawi (landlocked, population of 18 million) created a Department of Disaster Management Affairs to coordinate disaster risk management programs.
- Dominica:
- Population of 74,000.
- Devastated by tropical systems in 2015 and 2017; damages the first time equaled the country’s GDP and the second time amounted to twice its GDP.
- Under an IMF pilot program, developing a plan to improve resilience of infrastructure by 2030; IMF estimates donor aid totaling $200 million is required for fiscally sustainable implementation.
- Caribbean and Pacific small states:
- IMF economists rank 34 most disaster-prone nations (based on 20 years of data through 2017); top countries include the Marshall Islands, St. Vincent and the Grenadines, Tuvalu, Micronesia, and St. Lucia.
- Hurricane Ivan costs for Grenada in 2004 amounted to 148 percent of GDP.
- Hurricane Maria costs for Dominica in 2017 reached 260 percent of GDP.
- Jamaica:
- Nearly 300 years of recorded history with dozens of hurricanes; 17 named storms since 1951.
- Has built financial resilience layers:
- contingency fund of about J$2 billion ($15 million).
- standby financing in the form of a $285 million credit line from the Inter-American Development Bank.
- exploring disaster insurance and market-based instruments such as a catastrophe bond.
Economic and distributional findings from IMF research
- Natural disasters such as droughts, floods, and storms can often cause damages totaling 50 percent of a country’s GDP.
- 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.
- Climate change may triple that growth gap.
- As economies stagnate and revenues decline, disaster-prone nations carry significantly higher public debt than non-disaster-prone countries.
- A 2019 working paper by IMF economists Alessandro Cantelmo, Giovanni Melina, and Chris Papageorgiou:
- ranked countries by probability of sustaining a natural disaster using 20 years of data through 2017 and identified the 34 most disaster-prone nations.
- shows that to eliminate 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 recent IMF work in Caribbean nations shows:
- investing in structural resilience would increase potential economic output by 3–11 percent.
- deliver a growth dividend of 0.1–0.4 percent a year.
- Distributional concern: In sub-Saharan African countries, poorer households are most affected by climate change, exacerbating already-large inequalities.
IMF three-legged approach to disaster resilience (consistent with fiscal sustainability)
- Fiscal discipline and supportive international funding because of the scale of costs.
- First leg — Structural adaptation:
- Examples: strengthened roads, bridges, telecommunications, water supplies, sanitation systems.
- Second leg — Postdisaster and social resilience:
- Contingency planning and investments to ensure efficient disaster response with minimal disruption to public services (sheltering people, directing relief).
- Example: Mozambique created a social registry for distributing supplies after a disaster and invested in stronger schoolhouses that function as community shelters.
- Third leg — Financial resilience in advance of disasters (central pillar):
- Examples: contingency funds, standby financing, disaster insurance, risk-transfer mechanisms.
- Jamaica’s measures illustrate these layers (see Jamaica entry above).
Policy implications and recommendations
- Investing in resilience is likely to result in less human suffering and fewer lives lost than focusing solely on relief and recovery after disasters.
- International aid is crucial because many vulnerable countries are likely to find resilience investments unaffordable; donor financing can be more cost-effective than post-disaster intervention.
- Strengthening telecommunications and early-warning systems is important for rural and remote households that depend on mobile services for weather warnings, crop planning, and access to financing.
- Combining structural, social, and financial resilience measures can improve continuity of public services, reduce welfare losses, and support longer-term growth.
*Investing in Resilience — F&D Magazine, BOB SIMISON, December 2019.*/*
Content in this bundle
- الاستثمار في بناء الصلابة
- Investing in Resilience to Fight Climate Change – IMF F&D | DECEMBER 2019
- Invertir en resiliencia ● Finanzas y Desarrollo ● Diciembre de 2019
- Investir dans la résilience
- Simison
- Инвестиции в повышение устойчивости – Финансы и развитие – декабрь 2019 года
- Investing in Resilience to Fight Climate Change – IMF F&D | DECEMBER 2019