{
  "title": "Building Resilience to Natural Disasters: An Application to Small Developing States",
  "publication": "IMF Working Papers, October 30, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/10/30/building-resilience-to-natural-disasters-an-application-to-small-developing-states-45329",
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  "summary": "We present a dynamic small open economy model to explore the macroeconomic impact of natural disasters. In addition to permanent damages to public and private capital, the disaster causes temporary losses of productivity, inefficiencies during the reconstruction process, and damages to the sovereign",
  "sections": [
    {
      "heading": "Model and approach",
      "content": "- Dynamic small open economy model introduced to explore the macroeconomic impact of natural disasters.\n- Disaster effects modeled to include:\n  - permanent damages to public and private capital,\n  - temporary losses of productivity,\n  - inefficiencies during the reconstruction process,\n  - damages to the sovereign's creditworthiness.\n- Model used to study debt sustainability concerns arising from the need to rebuild public infrastructure over the medium term.\n- Analysis contrasts ex ante policies (building adaptation infrastructure and fiscal buffers) with post-disaster donor support."
    },
    {
      "heading": "Key findings",
      "content": "- Investing in resilient infrastructure can be useful, particularly when viewed as complementary to standard infrastructure, because it:\n  - raises the marginal product of private capital,\n  - crowds in private investment,\n  - helps withstand the impact of the natural disaster.\n- Debt sustainability is jeopardized by the medium-term need to rebuild public infrastructure and by sovereign creditworthiness damages."
    },
    {
      "heading": "Application to Vanuatu",
      "content": "- In the Vanuatu application, the model finds:\n  - donors should provide an additional 50% of pre-cyclone GDP in grants to be spent over the following 15 years to ensure public debt remains sustainable following Cyclone Pam.\n- Helping the government build resilience reduces the risk of debt distress and does so at lower cost for donors compared with large post-disaster grants."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Ex ante investments in adaptation infrastructure can be more cost-effective than relying solely on post-disaster donor grants.\n- Building resilient infrastructure that complements standard infrastructure can stimulate private investment through higher marginal product of private capital.\n- Fiscal buffers and adaptation investment should be evaluated alongside donor support strategies to manage debt sustainability and sovereign creditworthiness impacts after disasters.\n\nIMF Working Paper summary: Building Resilience to Natural Disasters: An Application to Small Developing States\n\n---\n\n Content in this bundle\n\n- wp17223\n  - wp17223 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp17223 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/10/30/building-resilience-to-natural-disasters-an-application-to-small-developing-states-45329"
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    "Authors: Ricardo Marto, Chris Papageorgiou, Vladimir Klyuev",
    "Published: October 30, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484324745.001",
    "Dynamic small open economy model introduced to explore the macroeconomic impact of natural disasters.",
    "Disaster effects modeled to include:",
    "Model used to study debt sustainability concerns arising from the need to rebuild public infrastructure over the medium term.",
    "Analysis contrasts ex ante policies (building adaptation infrastructure and fiscal buffers) with post-disaster donor support.",
    "Investing in resilient infrastructure can be useful, particularly when viewed as complementary to standard infrastructure, because it:",
    "Debt sustainability is jeopardized by the medium-term need to rebuild public infrastructure and by sovereign creditworthiness damages.",
    "In the Vanuatu application, the model finds:",
    "Helping the government build resilience reduces the risk of debt distress and does so at lower cost for donors compared with large post-disaster grants.",
    "Ex ante investments in adaptation infrastructure can be more cost-effective than relying solely on post-disaster donor grants.",
    "Building resilient infrastructure that complements standard infrastructure can stimulate private investment through higher marginal product of private capital.",
    "Fiscal buffers and adaptation investment should be evaluated alongside donor support strategies to manage debt sustainability and sovereign creditworthiness impacts after disasters.",
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