Jamaica’s Prime Minister Andrew Holness will deliver the feature address at the conference that is also being attended by several Caribbean Community (CARICOM) prime ministers, technocrats and international delegates.
Lagarde told the opening ceremony that natural disasters, including hurricanes, have caused widespread damage globally and in the case of the region, Hurricanes Irma and Maria devastated parts of the Caribbean last year, “causing so much destruction and suffering”.
She said more recently, Hurricane Michael wreaked havoc on Florida.
“These are repeated reminders that natural disasters carry no passport. No country is immune, no region is safe. In so many instances, the finger points to climate change, surely the greatest existential threat of our time.”
She said just recently, the United Nations Intergovernmental Panel on Climate Change indicated that the threat to the planet and its people is more grave than first anticipated
“As you all know so well, it is already making these disasters more ferocious, more frequent, and more frightening. It is therefore crucial that countries live up to their Paris Agreement commitments, and move toward a fully decarbonized global economy over the next few decades. We must push forward with greater ambition, and resist any temptations toward backsliding.”
The IMF official said that equally important is adaptation and strengthening resilience, adding “this has special resonance in the Caribbean region, which is on the front line of climate change.
“Its islands are among the top-25 most vulnerable nations. And their small size implies a big cost. Disaster damage in the Caribbean is six times more than in larger states,” she said, noting that in the United States, Hurricane Katrina generated losses of US$160 billion back in 2005, about one per cent of gross domestic product (GDP) as compared to what Dominica experienced last year where damages after Hurricane Maria exceeded 200 per cent of GDP.
She said that it follows that building resilience to natural disasters and climate change in this region is a necessity, not a luxury.
Lagarde said that building resilience to disasters and climate change rests on three complementary pillars, including 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 and emergency response, by ensuring rapid access to financing and contingency plans to help with recovery after a disaster.
She reiterated that Caribbean countries have made some good progress in these areas, including by strengthening regional cooperation for rapid disaster response and creating the Caribbean Catastrophe Risk Insurance Facility.
“This kind of investment can deliver big gains for countries. Recent IMF research on ECCU (Eastern Caribbean Currency Union) countries estimates that investing in public capital resilient to natural disasters can increase potential GDP by three to 11 per cent.”
Lagarde said despite the benefits, there are numerous reasons why these kinds of investments are lagging in the region.
She said on the domestic front, many countries in the Caribbean have high public debt and limited fiscal space.
“On the international front, the lion’s share of funding is for disaster assistance, not financing for adaptation. At the same time, cumbersome administrative procedures combined with capacity constraints complicate access to financing from climate funds.
“Political economy challenges have also played a role: governments sometimes shy away from long-term strategies that involve significant up-front costs with benefits that come much later,” she told delegates.
She said against this backdrop, “what I think is needed to move forward (is) collective effort to move the needle from an overarching focus on recovery following natural disasters toward building longer-term resilience.
“In turn, this will require a new approach based on an alliance of all stakeholders, domestic and international, to mobilize the needed resources based on credible strategies.”
She said countries would take the lead, they would develop an umbrella disaster resilience strategy, with input and support from the international financial institutions.
“The strategy will elaborate measures to get fiscal houses in order and to create fiscal space. It would also lay out a well-designed and fully-costed resilience building plan, including for risk transfer, which would be embedded in a sustainable multi-year macro-fiscal framework.”
Lagarde said that such a strategy, integrating micro and macro reforms, would, in turn, need the support of the international community.
“Climate change, after all, is a global problem requiring global action. My hope is that this kind of strategy will generate the credibility needed to entice low-cost and grant financing from development partners, climate funds, and international financial institutions.
“To operationalize this idea, I propose using two pilot countries for which supporting work is already underway, including a Climate Change Policy Assessment (or CCPA),” she said, urging the conference “to deliberate on this approach and help us formulate a way forward”.
She promised that the Washington-based financial institution will always seek to be a “reliable friend and partner” to the Caribbean, adding “we are helping build capacity and strengthen public financial management, to better manage fiscal resources and address disaster risks”.
She said the IMF’s Technical Assistance center in the Caribbean (CARTAC) has played a pivotal role in this effort and has launched together with the World Bank, pilot Climate Change Policy Assessments to assess country preparedness and identify needed reforms;
Lagarde said in response to a request from the Governor of the Eastern Caribbean Central Bank (ECCB), Timothy Antoine, and echoed by the G7, staff of the IMF and the World Bank have examined the scope for state-contingent debt instruments for Caribbean sovereigns.
“A note summarizing staff’s analysis has been circulated to conference participants. I am also told that draft term sheets from the International Capital Markets Association for various instrument structures are now available for interested sovereigns and investors,” she told the conference.