By RASHAD ROLLE
Tribune Staff Reporter
THE government plans to set aside a small percentage of future fiscal surpluses to help fund disaster recovery efforts, Prime Minister Dr Hubert Minnis said yesterday.
He was speaking in Washington during an Inter-American Development, International Monetary Fund and World Bank conference centred on the theme “building resistance to disasters and climate change in the Caribbean” by improving risk transfer.
Discussing catastrophe insurance solutions, Dr Minnis said: “By being the provider of technical assistance for innovative catastrophe insurance solutions, donors can promote the emergence of innovative risk financing solutions, including index-based insurance products, national and regional catastrophe insurance pools and risk transfer vehicles. (Bodies) such as the IMF can help to subsidise insurance premiums in the context of a country putting together a sound macro-fiscal framework. For example, with the assistance of the IMF and CARTAC, The Bahamas has passed fiscal responsibility legislation which aims to bring discipline to the government’s fiscal agenda with a view to attaining future fiscal surpluses. With this in our tool kit, the government has pledged to set aside two to three percent of these surpluses in a fund that can be used to pay the CCRIF premiums and assist to rebuild after a natural disaster.”
Dr Minnis noted Hurricane Matthew in 2016 led the government to borrow $150m, widening the fiscal deficit from one percent of the GDP before the storm to 1.9 percent of GDP afterwards.
“Subsequently,” he said, “we recognised that in post-disaster and recovery, we should have the resources and means at our disposal to finance our direct contingent liabilities more efficiently, and to be better able to provide additional aid to small businesses and low-income farmers, who are disproportionally impacted by disasters. As the frequency and severity of disasters increase due to climate change, the intensified shocks could create debt burdens on future generations, and erode development progress.”
Dr Minnis said it is important to promote insurance solutions for homeowners as he discussed the possibility of introducing natural disaster insurance for homeowners.
“The solutions in place in different countries range from comprehensive compulsory natural disaster covers offered by government-sponsored insurance entities to privately organised voluntary disaster insurance products. However, pooling of risks at the regional level may be the solution to overcome any shortcoming in any particular country.”
Dr Minnis acknowledged that despite the importance of reducing disaster risk, few countries like The Bahamas “have appropriate measures in place because other policy issues require greater attention and funding”.
“This,” he said, “has resulted in insufficient earmarking of financial resources for risk transfer measures. Policymakers are in need of clear evidence, including cost-benefit analysis, to convince the public and various stakeholders that a commitment to risk transfer is as practical and necessary as any other priority.”