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IMF Country Report No. 21/182
DOMINICA
DISASTER RESILIENCE STRATEGY
August 2021
The Disaster Resilience Strategy has been prepared by the Government of Dominica in broad consultation with stakeholders and development partners, including the staff of the IMF and the World Bank. It describes the macroeconomic, structural, and social policies being pursued by the government to build resilience against natural disasters and the associated financing needs. This document for Dominica is being made available on the IMF website by agreement of the member country as a service to users of the IMF website.
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Title page
GOVERNMENT OF DOMINICA
DOMINICA: DISASTER RESILIENCE STRATEGY
February 2021
EXECUTIVE SUMMARY
Context. Dominica is among the countries most vulnerable to natural disasters and climate change. During 1997–2017, it was the country with highest GDP losses to climate-related natural disasters and ranked in the top 10 percent among 182 countries for climate-related fatalities. Following a huge devastation, owing to back-to-back major storms in 2015 and 2017, Dominica announced its intention to become the first disaster resilient nation. In 2019, it was agreed with the government that the Fund, in consultation and collaboration with other development partners, would provide support for preparing a Disaster Resilience Strategy (DRS), a comprehensive plan including policies, cost, and financing to build resilience against natural disasters.
Recent progress. Following hurricane Maria in 2017, with estimated damage of 226 percent of GDP, there was a significant increase in public investment to rebuild public infrastructure resilient to natural disasters, financed mainly with Citizenship by Investment (CBI) revenues. In addition, the government developed a strategy for disaster preparedness and response with itemized investments and policies and estimates of resource requirements. The Covid-19 pandemic caused significant economic and social hardship owing to Dominica’s dependence on tourism receipts, which plummeted in the wake of the pandemic leading to a sharp decline in tax revenues. At the same time, Dominica was forced to increase and reprioritize public spending to address immediate health needs and make transfers to the unemployed. As a result, the fiscal and debt situations came under further strain leading to changes in plans and priorities, because of which a draft DRS prepared just ahead of COVID-19 had to be modified.
Disaster Resilience Strategy (DRS). The DRS is an umbrella document, which draws upon existing government plans and proposals, elaborating a strategy for Dominica to build resilience against natural disasters that is integrated into a credible macro-fiscal framework. It is organized around three pillars: structural resilience, financial resilience and post-disaster resilience. The total cost of transforming Dominica into a disaster-resilient state over a twenty-year period is estimated at US$2.8 billion (five times Dominica’s GDP). Model-based estimates calibrated to the Dominica economy indicate that the return to resilient investment outweigh the cost in the long term by supporting higher private investment and employment. However, debt would increase in the medium term as the cost of resilient investments and policies accrue up-front, but returns materialize only in the medium to long-term with a gradual increase in resiliency, which in the DRS takes two decades.
The support of the international community is an imperative. Dominica would be unable to finance the cost of building resilience without concessional financing from the international community. Integration of the cost and returns from DRS policies and investments indicates an annual financing gap of 8 percent of GDP, after incorporating a phased fiscal consolidation of 5.7 percent of GDP anchored by measures which have been fully identified. Attaining resilience with fiscal and external sustainability crucially depends on an increase in donor grants of about US$63 million per year, 3–4 times above recent levels.
Prepared by the Dominica Ministry of Finance, in consultation with the Climate Resilient Execution Agency of Dominica (CREAD), with support from the International Monetary Fund. The report benefitted of comments from other partners, including the World Bank, and the Caribbean Development Bank.
Contents
DOMINICA: DISASTER RESILIENCE STRATEGY
A. Introduction
B. Pillars of a Disaster Resilience Strategy
C. Recent Progress on the DRS Pillars and Plan
D. DRS Cost
E. A Comprehensive Macro-Fiscal Plan Incorporating DRS Cost
F. The way forward
BOXES
1. Making the Energy Sector Disaster Resilient
2. Activities supported by the Global Facility for Disaster Reduction and Recovery
3. Does It Pay to Invest in Resiliency?
TABLES
1. Economic Impact of Natural Disasters
ANNEXES
I. Cost and Damage in Recent Tropical Storms
II. CRRP Estimated Cost
