## Building Resilience to Natural Disasters: An Application to Small Developing States

_IMF Working Papers, October 30, 2017_

## Source details

**Canonical URL:** [Building Resilience to Natural Disasters: An Application to Small Developing States](https://www.imf.org/en/publications/wp/issues/2017/10/30/building-resilience-to-natural-disasters-an-application-to-small-developing-states-45329)

## Other formats

- [Markdown version](/en/publications/wp/issues/2017/10/30/building-resilience-to-natural-disasters-an-application-to-small-developing-states-45329/index.md)
- [Structured JSON version](/en/publications/wp/issues/2017/10/30/building-resilience-to-natural-disasters-an-application-to-small-developing-states-45329/index.json)
- [Bundle manifest](/en/publications/wp/issues/2017/10/30/building-resilience-to-natural-disasters-an-application-to-small-developing-states-45329/bundle-manifest.json)

## Bibliographic details
- Authors: Ricardo Marto, Chris Papageorgiou, Vladimir Klyuev
- Published: October 30, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484324745.001

---

### Model and approach
- Dynamic small open economy model introduced to explore the macroeconomic impact of natural disasters.
- Disaster effects modeled to include:
  - permanent damages to public and private capital,
  - temporary losses of productivity,
  - inefficiencies during the reconstruction process,
  - damages to the sovereign's creditworthiness.
- 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.

### Key findings
- Investing in resilient infrastructure can be useful, particularly when viewed as complementary to standard infrastructure, because it:
  - raises the marginal product of private capital,
  - crowds in private investment,
  - helps withstand the impact of the natural disaster.
- Debt sustainability is jeopardized by the medium-term need to rebuild public infrastructure and by sovereign creditworthiness damages.

### Application to Vanuatu
- In the Vanuatu application, the model finds:
  - 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.
- 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.

### Policy implications and recommendations
- 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.

*IMF Working Paper summary: Building Resilience to Natural Disasters: An Application to Small Developing States*

---

## Content in this bundle

- **wp17223**
  - [wp17223 (Markdown version)](/-/media/files/publications/wp/2017/wp17223.pdf.md){rel="alternate" type="text/markdown"}
  - [wp17223 (PDF)](/-/media/files/publications/wp/2017/wp17223.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2017/10/30/building-resilience-to-natural-disasters-an-application-to-small-developing-states-45329_