A series of devastating storms in the Caribbean has highlighted the vulnerability of small island states, where a single hurricane can undo years of development and plunge prosperous households into poverty from one day to the next.
Hurricane Irma turned 90 percent of homes on Barbuda to rubble and left financial losses of USD 100-200 million. Hurricane Maria has knocked out power to the entire US territory of Puerto Rico.
For most developed countries, a natural disaster triggers action from national governments to provide emergency relief and compensation – witness the recent emergency spending provided by the US Congress following Hurricanes Harvey and Irma. But unlocking emergency funds is not always straightforward for small island developing states, not all of which have easy access to capital markets. Small island states often have high public debt ratios and insurance coverage among households and businesses can be limited.
Grenada is still paying the consequences of being hit successively in 2004 and 2005 by Hurricanes Ivan and Emily. Estimated losses amounted to 200 percent of gross domestic product, and Grenada is still in “debt distress” according to the International Monetary Fund. The Cook Islands are still subject to austerity measures under a 1998 debt restructuring agreement prompted by the reconstruction costs that followed Cyclone Martin two decades ago.
Read more at: Organisation for Economic Cooperation and Development