Environmental vulnerability and debt sustainability in the Caribbean: do we have enough tools to address catastrophic risk?

Policy Brief No. 62

The devastating impact of the 2017 Hurricane season in the Caribbean region has put the spotlight on the wide-ranging consequences of environmental vulnerability for developing countries.

Rather than being an exception, climate change is expected to make this type of events more frequent and intense.

In this context, limited capacity to mobilize domestic resources combined with insufficient multilateral financing facilities creates conditions under which developing countries are unable to adequately invest in climate change adaptation needs and catastrophic risk insurance.

Consequently, large scale natural disasters put at risk the environmental, economic and social viability of environmentally vulnerable countries.

This calls for the international community to review the tools available to address catastrophic risks in order to support the successful adaptation to climate change of developing countries.

This policy brief analyzes the interplay of these economic dynamics in the Caribbean.

Key points:

  • The increasingly frequent occurrence of natural disasters due to climate change put at risk debt sustainability and socio-economic stability of vulnerable developing countries.

  • The international community must review and enhance the tools available to such countries to maintain debt sustainability and mobilize resources for climate change adaptation and developmental transformation.

  • Measures should include a review of criteria for the prioritization of ODA and concessional lending funds, improved insurance schemes and the establishment of a Global Disaster Mechanism (GDM) under the auspices of the United Nations.