Opening Remarks by Christine Lagarde at the 2018 High-Level Caribbean Conference

IMF News, November 26, 2018

Source details

Canonical URL: Opening Remarks by Christine Lagarde at the 2018 High-Level Caribbean Conference

Recent disasters highlighted:
- a massive earthquake and tsunami in Sulawesi, killing 2,000 people, injuring more, and destroying more than 70,000 homes.
- Hurricanes Irma and Maria (2017) devastated parts of the Caribbean.
- Hurricane Michael wreaked havoc on Florida.
Climate change described as “surely the greatest existential threat of our time,” with the UN Intergovernmental Panel on Climate Change indicating the threat is “more grave than we thought.”
Observations on vulnerability and scale of losses:
- Caribbean islands are among the top-25 most vulnerable nations.
- Disaster damage in the Caribbean is six times more than in larger states.
- Hurricane Katrina generated losses of US$160 billion in 2005—about one percent of GDP.
- In Dominica in 2017 damages after Hurricane Maria exceeded 200 percent of GDP.
Framing: “Building resilience to natural disasters and climate change in this region is a necessity, not a luxury.”

The speech identifies three complementary pillars:
- Securing structural protection, through resilient infrastructure; adequate land use, zoning rules, and building codes; and early warning systems.
- Financial protection, through insurance or other risk-sharing mechanisms to reduce the cost of damage done by disasters when they occur.
- Emergency response, by ensuring rapid access to financing and contingency plans to help with recovery after a disaster.

IMF research on ECCU countries estimates that investing in public capital resilient to natural disasters can increase potential GDP by 3-11 percent.

Domestic constraints:
- Many countries in the Caribbean have high public debt and limited fiscal space.
- Cumbersome administrative procedures combined with capacity constraints complicate access to financing from climate funds.
- Political economy challenges: governments sometimes shy away from long-term strategies that involve significant up-front costs with benefits that come much later.
International constraints:
- The lion’s share of funding is for disaster assistance, not financing for adaptation.

Core elements:
- A collective effort to shift focus from post-disaster recovery to longer-term resilience building.
- An alliance of all stakeholders, domestic and international, to mobilize needed resources based on credible strategies.
- Countries take the lead: get their fiscal houses in order and develop an umbrella Disaster Resilience Strategy with input and support from the international financial institutions.
- The strategy should be a well-designed and fully-costed resilience building plan, including for risk transfer, embedded in a sustainable multi-year macro-fiscal framework.
- Such a strategy aims to generate credibility to entice low-cost and grant financing from development partners, climate funds, and international financial institutions.
Operational step proposed:
- Use two pilot countries for which supporting work is already underway, including a Climate Change Policy Assessment (or CCPA), and deliberate on this approach during the conference.

The IMF positions itself as “a reliable friend and partner” and lists initiatives to support resilience efforts:
- (i) Helping build capacity and strengthen public financial management, to better manage fiscal resources and address disaster risks. The IMF’s Technical Assistance center in the Caribbean — CARTAC — has played a pivotal role in this effort. “And I want to thank Marie-Claude and her government for Canada’s recent pledge to support the IMF’s capacity development globally, and especially through its support for the Caribbean, including for CARTAC;”
- (ii) Launched, together with the World Bank, the Climate Change Policy Assessments to assess country preparedness and identify needed reforms;
- (iii) Working with the World Bank on the technical design of state contingent debt instruments, which could help ease short-term financing burdens on countries hit by natural disasters. “A note summarizing staff’s analysis has been distributed. I am also pleased that draft term sheets from the International Capital Markets Association for various instrument structures are now available for interested sovereigns and investors.”
- (iv) Increased the annual access limits under our rapid credit facilities for countries hit by disasters.
The IMF remains open to hearing ideas on what more can be done, including in its lending toolkit.

A call for concrete proposals and collective action: “For when it comes to natural disasters and climate change, we are all in this together.”

Opening Remarks by Christine Lagarde at the 2018 High-Level Caribbean Conference