WASHINGTON, DC October 22, 2019 (CMC) — The World Bank is providing a US$14.85 million grant to support Jamaica in expanding its financial protection against natural disaster risks.
The Washington-based financial institution said that the funds from the Global Risk Financing Facility (GRiF), which is a multi-donor trust fund, supported by Germany and the United Kingdom, represent the largest made by GRiF to a middle-income country.
World Bank Country Director for the Caribbean, Tahseen Sayed, made the announcement at the event, “Learning from Jamaica’s Economic Turnaround”, during the World Bank-IMF Annual Meetings here.
The event featured a presentation from Jamaica’s Minister of Finance, Dr. Nigel Clarke, on the lessons from the island’s success in reducing public debt by almost 50 percent of gross domestic product (GDP) in six-and-a-half years, while reducing unemployment and inflation to historically-low levels.
The World Bank said despite Jamaica’s fiscal achievements, the country remains vulnerable to natural disasters and extreme weather events that could threaten the macroeconomic outlook and fiscal gains.
“Approximately 18 months ago, we set out our policy to take a multi-layered and strategic approach to protect Jamaica against the potential fiscal shocks that can be caused by natural disasters. In March, we began the capitalization of a Natural Disaster Fund with a historic allocation, even as we finalized our application, with World Bank assistance, to the GRiF,” Clarke said.
He said assistance from the GRiF is crucial as the most significant of the layers involve low-frequency, high-severity events that can be covered, in part, by risk-transfer instruments, such as a catastrophe bond, which require premiums to be paid and hence fiscal space.
“This GRiF Grant is therefore highly appreciated as it makes the goal of multi-layered coverage more realizable, by assisting Jamaica in covering the premium cost of a risk-transfer instrument,” he added.
The World Bank said recognizing the risk of natural disasters, the government has embarked on an ambitious reform program, combining expanded financial protection against disasters with fiscal and public financial management reforms, designed to enhance resilience.
“This GRiF grant bears testimony to Jamaica’s strong progress in building fiscal and financial resilience,” said Sayed.
“The World Bank remains committed to deepening its partnership to help the country in its efforts to sustain these hard-won gains. We are pleased that the GRiF grant is one part of a package of new support, provided by the World Bank, which includes US$140 million for fiscal resilience, growth, and enhancing social safety nets,” she explained.
The World Bank, with support from the United Kingdom, is providing technical assistance for Jamaica’s preparation of a National Disaster Risk Financing Policy. The financial institution is also working with the Jamaican government on risk modeling, which could be used to access risk insurance, through the capital markets.
GRiF is supported by Germany and the United Kingdom, to strengthen the financial resilience of vulnerable countries, by enabling earlier and more reliable response and recovery to climate shocks, disasters, and crises.
Within the World Bank, it is managed by the Disaster Risk Financing and Insurance Program and the Global Facility for Disaster Reduction and Recovery. GRiF supports the establishment of pre-arranged risk financing instruments, including market-based instruments like insurance.