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Tobias N. Rasmussen is an economist in the IMF’s Western Hemisphere Department. The author thanks Paul Cashin, Prachi Mishra, David O. Robinson, Ratna Sahay, and seminar participants at the IMF and at the Ministries of Finance of Antigua and Barbuda, Grenada, Dominica, St. Lucia, St. Kitts and Nevis, and St. Vincent and the Grenadines for their many useful comments and suggestions.
EM-DAT defines as affected people requiring immediate assistance during a period of emergency. The figures for damage capture the value of direct damage to infrastructure, crops, housing, and other capital. The figures are based on a large number of different primary sources and are associated with substantial uncertainty, especially the estimates of damage where different agencies often report widely different numbers. Despite the wealth of information, the data still suffer from under-reporting, especially in the earlier periods, and the analysis therefore focuses on the period since 1970.
The ECCU countries are Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. Anguilla and Montserrat are British dependencies and are not analyzed independently.
Crowards and Coulter (1998), ECLAC (2000), and Pollner (2001) reach a similar conclusion. At a broader level, the findings are also in line with the composite vulnerability indexes proposed by several international institutions (see Atkins et al., 2000; Crowards, 2000a; and United Nations, 2000). In addition to proneness to natural disaster, these indexes include factors such as susceptibility to terms of trade shocks and concentration of exports to rank countries according to their overall vulnerability. The different indices all find that small isolated low-income countries are the most vulnerable, with the ECCU countries in most cases ranking near the very top.
IMF (2003), citing a number of different studies, finds that exogenous shocks and the associated policy responses have contributed to the accumulation of unsustainable external debt in many developing countries.
Cashin (2004) shows that filtering out the effect of business cycles dramatically increases the volatility of real GDP growth in the ECCU relative to that of other countries.
Windward Islands Crop Insurance, or WINCROP, provides storm insurance for banana growers. The scheme, which covers the entire export crop in Dominica, Grenada, St. Lucia, and St. Vincent and the Grenadines, provides cover only against a small proportion (about 20 percent) of losses, but this has proven sufficient to enable growers to rehabilitate quickly.
The ECCB has a fiscal reserve account to assist member countries facing economic difficulties, including those caused by natural disasters. Contributions to the account are mandatory, with an amount automatically deducted from the profits owed to each member country, and the terms of drawings are determined on a case-by-case basis. The account, which has been in place for a decade, currently holds about EC$12 million and has never been used in relation to a natural disaster.