Dr Nigel Clarke, Minister for Finance and the Public Service;
Finance Minister Dr Nigel Clarke said money would be drawn from both the Emergency Fund and the Natural Disasters Fund to cover recovery expenditure from the effects of Hurricane Beryl. The fund is part of a multi-tiered funding package put in place by the Government to help the country “respond, recover and rebuild” after natural disasters.
In a statement to the Jamaica Observer late Thursday, Clarke said funds set aside in the previous year would be utilised whilst an assessment was carried out as to whether other sources of funding would be utilised or required.
“Hurricane Beryl was extremely fortunate not to make landfall in Jamaica as the central trajectory of the storm passed 45 miles south of Kingston and traveled off the southern coast of Jamaica,” Clark said in the release.
“There has been heavy damage in some parts of the island, but in many other areas, including much of Kingston, ackee and mangoes remain on the trees,” he noted.
However, he pointed out that “the Government of Jamaica (GOJ) has strategically put in place multi-tiered financial instruments to pre-fund emergency response and recovery costs for natural disasters. While it is not expected or planned for every storm to activate every instrument, the aim is to ensure that some instruments are always available for any storm.”
“Therefore, judging from the scale of damages that have been preliminary and empirically assessed, there is no doubt that the Japanese government must utilize all available resources in the first two tiers, namely the Contingency Fund and the Natural Disaster Fund, which together amount to $4.5 billion.”
The fund was drawn from budgetary allocations: the 2024/25 budget earmarks $1 billion for natural disaster preparedness, five times the $200 million set aside in the previous two years.
Clark acknowledged that estimates for the cost of recovery were still being compiled, and suggested that if the $4.5 billion wasn’t enough, other available funding sources would be used.
“We may also need to access the next tier, which consists of a conditional credit claim with the IDB, so I have started that process today. The maximum amount for this tier is around $46 billion, but it will take a few days to see how much exactly this Beryl will trigger,” he added.
He also noted that Jamaica has tropical cyclone and excessive rainfall insurance through the Caribbean Catastrophe Reinsurance Facility (CCRIF), which could also be triggered.
“We will know by Friday about possible tropical cyclone insurance payouts, but we will have to wait until early next week to receive feedback on excess rainfall insurance.”
Jamaica has paid $1.5 billion in premiums to CCRIF, which provides insurance against natural disasters to countries in the region.
The sources have come under scrutiny after a report released Thursday by Plenum Investments, a Switzerland-based specialist catastrophe bond fund manager, said Wednesday’s passage of Hurricane Beryl made it unlikely that any payments would be made from the World Bank’s $150 million ($23.4 billion) catastrophe bond for Jamaica.
“In terms of the top tier of our catastrophe risk framework, the path and intensity of Hurricane Beryl did not trigger the activation of Jamaica’s catastrophe bonds,” Clark acknowledged. Catastrophe bonds are designed to provide financial protection against Category 5 hurricanes making landfall in Jamaica.
“If Hurricane Beryl had made landfall in Jamaica, or if Hurricane Beryl had maintained the strength observed on Tuesday (measured by central pressure), then surely the catastrophe bond would have been triggered,” the finance minister said in a statement to Business Week.
However, he said if payments are not made, Jamaica could also turn to the International Monetary Fund (IMF) if the funds needed for reconstruction are greater than what can be obtained from the emergency fund and natural disaster fund, or borrowed from the IDB and disbursed from CCRIF.
“In addition to the above, the Government of Japan has a $140 billion Precautionary Liquidity Line (PLL) with the IMF. The PLL is targeted at countries with strong fundamentals and can be drawn upon in the event of liquidity problems. While it is too early to rule anything out, we believe that Hurricane Beryl has not caused or will not cause a liquidity problem for the Government of Japan,” the minister said.
He said the Japanese government would compile estimates of damage and needed interventions over the next few days and finalize total funding from disaster risk financing sources.
Clarke said this multi-layered protection will act as a shield to prevent Jamaica from falling into another period of economic instability.
“We have learned from past experiences. What makes this different from similar disasters in the past is that the Japanese government has proactively prepared disaster risk financing in advance. Therefore, there is no need to scramble after Hurricane Beryl to raise funds needed for emergency response and recovery,” he concluded.
