Jamaica to rely on own funds to address Beryl recovery

Jamaica to rely on own funds to address Beryl recovery

FINANCE Minister Dr Nigel Clarke said monies from both the Contingency Fund and the Natural Disaster Fund will be tapped to help finance the recovery spending in the aftermath of Hurricane Beryl.

The funds are part of a multi-layered set of financing the Government has put in place to help the country “respond, recover and rebuild” after natural disasters.

Clarke, in a release late Thursday, said the monies which have been set aside in previous years will be called upon while assessments are made on whether other sources of funding are triggered or will be needed.

“We are very fortunate that Hurricane Beryl did not make landfall in Jamaica as the trajectory of the centre of the hurricane passed 45 miles south of Kingston and continued just off Jamaica’s south coast,” Clarke said in the release.

“Though there was significant damage in sections of the island, in many other parts, including much of Kingston, the ackees and mangoes remain on the trees,” he noted.

But he pointed out that the “Government of Jamaica (GOJ) has strategically put in place a multi-layered set of financial instruments to pre-finance the emergency response and recovery costs of natural disasters. While it is neither expected nor designed that all storms will trigger all instruments, the idea is that we will always be able to access some instruments for every storm”.

“As such, the extent of the damage, as preliminarily and anecdotally assessed, will certainly mean that the GOJ will have to draw on all of the resources available in the first two layers: our Contingency Fund and the Natural Disaster Fund. This totals $4.5 billion.”

That fund has been seeded from budgetary allocation. The 2024/25 budget shows $1 billion was placed in the Contingency for Natural Disaster. It was five times the $200 million set aside in each of the previous two years.

Estimates of the cost to recover are still being tallied, Clarke acknowledged, and indicated that if the $4.5 billion is not enough, the other sources of funds that have been put in place will also be tapped.

“We may also have to access the next layer, which consists of Contingent Credit Claim with the IDB. As such, today I initiated that process. While the maximum amount under this layer is approximately $46 billion, it will take a few days to ascertain exactly how much of this Beryl will trigger,” he added.

He also pointed out that with Jamaica has a tropical cyclone and excess rainfall policies with the Caribbean Catastrophe Reinsurance Facility (CCRIF) which could also be triggered.

“We will know by Friday on possible payouts from the tropical cyclone policy, but we have to wait until early next week to receive feedback regarding the excess rainfall policy.”

Jamaica paid a premium of $1.5 billion into the CCRIF which provides insurance coverage for natural disasters to regional countries.

These sources are being turned to after a report from Swiss-based catastrophe bond fund management specialist Plenum Investments on Thursday said the passage of Hurricane Beryl Wednesday makes it unlikely that a payout will be triggered from the World Bank-facilitated US$150 million ($23.4 billion) catastrophe (CAT) bond for Jamaica.

“Regarding the top layer in our disaster risk framework, the path and intensity of Hurricane Beryl did not trigger Jamaica’s Catastrophe Bond,” Clarke acknowledged. The CAT bond serves to provide financial protection against a Category 5 hurricane making landfall in Jamaica.

“Had Hurricane Beryl made landfall in Jamaica or had Hurricane Beryl retained its intensity as observed on Tuesday [as measured by centralised air pressure] it would have certainly triggered the Cat Bond,” the finance minister noted in the release to the media.

But he said with the payout not being triggered, Jamaica could also turn to the International Monetary Fund (IMF) if the funds needed to recover are larger than he can get from the Contingency Fund and the Natural Disaster Fund or to borrow from the IDB or payout from CCRIF.

“In addition to the above the GOJ has a $140 billion precautionary and liquidity line (“PLL”) with the IMF. The PLL is intended for countries with strong fundamentals and can be drawn in the event of liquidity problems that emerge. While it is too early to rule anything out, we do not see that Hurricane Beryl has led to or will lead to liquidity issues for the GOJ,” the minister indicated.

He said over the next few days the GOJ will aggregate the estimates of damage and interventions required and finalise the total resources from disaster risk financing sources.

Clarke said the layers of protection are a shield against Jamaica falling back into a period of economic instability.

“We have learned from past experiences. What differentiates this time from previous similar occasions is that the GOJ has been proactive in arranging disaster risk financing in advance. As such we do not need to scramble in the aftermath of Hurricane Beryl to finance the emergency response and recovery required,” he concluded.