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Debt Sustainability under Catastrophic Risk: The Case for Government Budget Insurance
Author:
Eduardo A. Cavallonull

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Mr. Eduardo Borensztein
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Mr. Patricio A Valenzuela
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 044
Language:
English
Publication Date:
01 Feb 2008
DOI:
https://doi.org/10.5089/9781451869064.001
ISBN:
9781451869064
ISSN:
1018-5941
Pages:
26
Keywords:
WP; debt; insurance instrument
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Natural disasters are an important source of vulnerability in the Caribbean region. Despite being one of the more disaster-prone areas of the world, it has one of the lowest levels of insurance coverage. This paper examines the vulnerability of Belize's public finance to the occurrence of hurricanes and the potential impact of insurance instruments in reducing that vulnerability. The paper finds that catastrophic risk insurance significantly improves Belize's debt sustainability. In addition, the methodology employed makes it possible to estimate the appropriate level of insurance, which for the case of Belize is a maximum coverage of US$120 million per year.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2008: Issue 044