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International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Western Hemisphere Dept., and International Monetary Fund. Asia and Pacific Dept

building include lower expected losses from disasters, higher returns to private investment, improved employment and output performance, and better continuity in public services after a disaster. International financial institutions and other development partners offer various forms of support to disaster-vulnerable countries, but many countries have limited capacity to take full advantage of such support, which can be fragmented and poorly coordinated across providers. This paper argues that a fleshed out nationally-owned DRS could act as the anchor or platform for

International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Western Hemisphere Dept., and International Monetary Fund. Asia and Pacific Dept

second group: countries where natural disasters can have a large macroeconomic impact and, hence, where building resilience to natural disasters is a macro-critical challenge . Countries that fall into this grouping are typically either small or poor or both, with limited administrative capacity to develop a disaster risk management strategy to contain the impact of adverse shocks. This paper uses the term disaster-vulnerable countries to refer to such countries. 4. The difficulty of building resilience to natural disasters in disaster-vulnerable states was

International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Western Hemisphere Dept., and International Monetary Fund. Asia and Pacific Dept
This paper discusses how countries vulnerable to natural disasters can reduce the associated human and economic cost. Building on earlier work by IMF staff, the paper views disaster risk management through the lens of a three-pillar strategy for building structural, financial, and post-disaster (including social) resilience. A coherent disaster resilience strategy, based on a diagnostic of risks and cost-effective responses, can provide a road map for how to tackle disaster related vulnerabilities. It can also help mobilize much-needed support from the international community.
Wei Guo

recovery costs as significant stocks of public and private infrastructure have to be rebuilt ( IMF 2018b ). Given the large size of these shocks and limited fiscal space in disaster-vulnerable countries, much of the recovery costs are often financed by official development assistance from the international community ( IMF 2019 ). A significant amount of the damage and associated output lost could be avoided through investment in building resilient infrastructure in vulnerable areas before the next disaster strikes (in other words, an ex ante intervention). However

International Monetary Fund
Small developing states are disproportionately vulnerable to natural disasters. On average, the annual cost of disasters for small states is nearly 2 percent of GDP—more than four times that for larger countries. This reflects a higher frequency of disasters, adjusted for land area, as well as greater vulnerability to severe disasters. About 9 percent of disasters in small states involve damage of more than 30 percent of GDP, compared to less than 1 percent for larger states. Greater exposure to disasters has important macroeconomic effects on small states, resulting in lower investment, lower GDP per capita, higher poverty, and a more volatile revenue base.
International Monetary Fund

, and disaster financing approaches discussed above should be part of a top-down approach to budgeting under a transparent and sustainable medium-term fiscal framework (see IMF, 2009 and 2014b ). The Fund should continue to play a leading role as provider of technical assistance on PFM practices in small developing states and other disaster-vulnerable countries ( Box 9 ). Box 9. A Case Study on IMF Capacity Building on PFM Practices—Pacific Islands PFM capacity building, designed to improve budget planning and enhance the transparency of public funds, helps

International Monetary Fund. African Dept., International Monetary Fund. Asia and Pacific Dept, International Monetary Fund. European Dept., International Monetary Fund. Fiscal Affairs Dept., International Monetary Fund. Legal Dept., International Monetary Fund. Middle East and Central Asia Dept., International Monetary Fund. Monetary and Capital Markets Department, and International Monetary Fund. Western Hemisphere Dept.

assessment of small states’ preparedness for climate change accompanying a country’s Article IV consultation or program review document as a stand-alone selected issue paper to the Executive Board. This provides an opportunity to integrate climate issues to help develop a coherent policy framework and catalyze climate change financing. 50. Debt sustainability assessments take on additional importance in disaster-vulnerable countries . Post-disaster recovery and rebuilding programs typically often include a debt-financed element, and the amount and terms of such

International Monetary Fund. African Dept., International Monetary Fund. Asia and Pacific Dept, International Monetary Fund. European Dept., International Monetary Fund. Fiscal Affairs Dept., International Monetary Fund. Legal Dept., International Monetary Fund. Middle East and Central Asia Dept., International Monetary Fund. Monetary and Capital Markets Department, and International Monetary Fund. Western Hemisphere Dept.
This guidance note highlights the unique economic characteristics and constraints facing small developing states. It provides operational guidance on Fund engagement with such countries, including on how small state characteristics might shape Fund surveillance and financial support, program design, capacity building activities, and collaboration with other institutions and donors. The note updates the previous version that was published in May 2014. It incorporates modifications resulting from Board papers and related Executive Board discussions that have taken place since the March 2013 Board papers on small states, which provided the foundations of the original guidance note. Based on these inputs, five key thematic areas (G.R.O.W.TH.) have been identified as central to the policy dialogue: • Growth and job creation. With small states experiencing relatively weak growth since the 1990s, Fund staff working on small states should ensure an explicit focus on growth in both surveillance and program-related work. • Resilience to shocks. Small states experience higher macroeconomic volatility and more frequent natural disasters. Staff should be ready to advise on how to tailor macroeconomic policies to provide greater resilience to shocks and climate change. • Overall competitiveness. Options to improve relative prices may include exchange rate adjustment (where possible) or measures supportive of internal devaluation (if not), and efforts to improve the business climate, including through regional initiatives. • Workable fiscal and debt sustainability options. With many small states having very high debt burdens, reducing debt to manageable levels requires sustained fiscal consolidation with supporting policies and structural reforms. In cases where the amount of adjustment needed to restore debt sustainability is not feasible or adequate financing is not available, debt restructuring may be needed. • Thin financial sectors. Developing deeper and more competitive, yet sound, financial sectors contributes to macroeconomic stability and enhances the effectiveness of policy interventions while strengthening competitiveness by improving business access to financial services.
International Monetary Fund. Legal Dept.

its surveillance and capacity building activities. A coherent resilience strategy should fit within a medium-term macroeconomic policy framework that is consistent with maintaining debt sustainability, including under adverse shocks—an area of core Fund expertise. Staff could also contribute through analysis of the economic impact of disasters and of trade-offs between public investment and debt accumulation. Directors agreed that the Fund’s lending toolkit was sufficiently flexible to provide support for disaster-vulnerable countries that face a BoP need, but most

International Monetary Fund. Legal Dept.

Abstract

I shall begin by outlining four general points that were made in the course of the Board discussion. First, Executive Directors generally endorsed the approach that the Fund has taken in the three major aspects of the subject dealt with in the staff paper.