FINANCE Minister Nigel Clarke said the Government will not be exhausting the funds it has for disaster risk financing to pay for recovery following the passage of Hurricane Beryl. Clarke said only $5 billion will be withdrawn from local funds and no loans will be taken.

Clarke, addressing the House of Representatives on Tuesday, said the $5 billion that will be drawn down is part of $10.9 billion in financing available to help the country recover from Hurricane Beryl. He said other sums will come from shifting around budget allocations in the supplementary estimate to be tabled later this fiscal year and added that the move to conserve the remaining balances is meant to address the risks posed for the remainder of the hurricane season which goes up to November 30.

“We have to remember that we’re in the beginning of the hurricane season so we can’t completely drain these resources. As such, Madame Speaker, the Government plans to tap $5 billion from our disaster risk financing resources to address the immediate relief and recovery efforts related to Hurricane Beryl,” said Clarke in his presentation.

He went on to outline how the rest of the $10.9-billion recovery fund would be financed.

The bulk of the financing available is coming from the country’s Contingencies Fund which stood at $5.3 billion, relative to the legislative limit of $10 billion. Jamaica is also set to receive US$16.3 million ($2.5 billion) and US$10.3 million ($1.6 billion) from the Caribbean Catastrophe Risk Insurance Facility (CCRIF) related to tropical cyclones and excessive rainfall, respectively. The country also has a National Natural Disaster Risk Fund (NNDRF) which had $0.5 billion before accounting for the budgeted contribution of $1 billion for the 2024/2025 fiscalyear.

Additionally, Jamaica will benefit from donations from several multilateral agencies and governments for specific efforts. US$2.5 million is to be received from the United Nations, US$200,000 from the Inter-American Development Bank (IDB) and Caribbean Development Bank (CDB) and other partners which totals around $700 million.

“Any amount above the $5 billion that we draw from these resources, Madame Speaker, that is, for this fiscal year, we will finance through the proceeds of donations and reallocation of budgetary resources. All expenditures undertaken and planned to be undertaken in relation to Hurricane Beryl up to that point in time will be represented in the first supplementary estimates to be tabled later this year,” the finance minister expounded.

But the $10.9-billion recovery fund is set below the estimated damage of between $40 billion and $45 billion. Clarke, who was asked by Opposition spokesman on finance Julian Robinson about why the planned spending is below the recognised cost of recovery, noted that the most critical areas, such as hospitals and schools, with missing roofs would be taking precedence along with any other areas to support relief and recovery efforts.

“It would not be possible even if the resources were available to address all of the reconstruction that’s necessary within the remaining months of the fiscal year. It would just not be physically possible. What is going to happen is that we have to prioritise where the more important and emergency things are dealt with up front. You programme your reconstruction efforts across budgetary cycles so that it can be planned properly and accommodated. However, things that are necessary and vital in the prioritisation, they go up to the top of the queue,” the finance minister expounded.

He said that means that some roads that have been damaged in the hurricane may not be fixed in this budget cycle. But he pointed out that monies set aside for road rehabilitation under the $40-billion Shared Prosperity Through Accelerated Improvement (SPARK) programme could also find its way helping in some cases, though he noted that the details will have to be worked out.

Clarke also explained the way the catastrophe bond works: If there was a US$30-million payout triggered under the specific conditions, then US$120 million would be remaining. These remaining funds would cover the other hurricane seasons going up to 2027, and if there were other hurricanes that were to trigger the CAT bond, the available sums would just decrease incrementally until there are no remaining funds if that were to occur.

Also, the move to tap the CCRIF has left Jamaica with US$68 million for tropical cyclones and US$13 million on excessive rainfall in available coverage.

But explaining that he wants to see Jamaica doing more to be able to take care of itself after a disaster, Clarke said there is a need to build up additional layers of disaster risk financing to cover different events as a way to be fiscally prudent for future events. He highlighted that the threshold to unlock the NNDRF is 1.5 per cent of gross domestic product, which is meant to cover medium severity events. Low frequency, high severity events, such as hurricanes and earthquakes, are transferred to the international capital markets through a suite of financial instruments.

This is crucial, as he highlighted that the impact of Hurricane Beryl to government operations, such as National Water Commission (NWC) not earning revenue in different areas after Beryl along with tax offices being closed for some days, will lead to loss of government revenue.

“The idea is for to be built on over time and to be made more durable, because as we grow and our economy becomes more complex, what we have at stake is going to be higher. So we’re going to have to be constantly increasing the protection that we have,” he added.

Clarke closed his remarks saying, “One of the deficiencies, historically, for reasons that are understood in our economic and fiscal allocation, has been in my view a suboptimal trade-off between the present and the future, in that we have been very much focused on today with no preparation for tomorrow, and that has led us into problems in the past. How we address Beryl is very important so that we don’t make the mistake.”