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IMF: Jamaica heat wave could stir megastorm, big losses

The current heatwave in Jamaica is symptomatic of a wider warming climate that experts think may fuel a once-in-a-lifetime hurricane.

And if such conditions were to persist and trigger a 100-year event, Jamaica could face a fallout of more than US$1.7 billion in projected damage, according to a new report from staff of the International Monetary Fund. That is nearly $270 billion at current exchange rates.

“Jamaica suffers from damaging winds, rain, and storm surges, especially during the tropical cyclone season. Over the coming decades, Jamaica is expected to experience more heatwaves, more irregular rainfalls that bring heightened hazards of droughts or flooding, stronger tropical cyclones, and rising sea levels,” said an IMF staff report titled Technical Assistance Report – Climate Public Investment Management Assessment (C-Pima) published last month.

The C-Pima report indicates that Jamaica is highly exposed to multiple natural hazards, including tropical cyclones, floods, and droughts. The country placed 47th out of 191 countries in the 2023 Inform Risk Index, based on a European Union report released this year that the IMF staff ranked. That report focuses on hazards and exposure related to natural and human events; vulnerability, which speaks to social and economic factors; and lack of coping capacity, that is, institutional or infrastructure shortcomings.

The affluent country of Liechtenstein in Europe ranked as the least risky, with South Sudan and the Central African Republic tied as the riskiest, while in the Caribbean, Trinidad & Tobago and Cuba are seen as less risky than Jamaica.

The risk index was published by Inform, a collaboration of the Inter-Agency Standing Committee and the European Commission.

The IMF staff report on Jamaica noted that intensified climate hazards create more “socioeconomic vulnerabilities” for the poor in Jamaica. Since infrastructure, population, and tourism activities are concentrated in the coastal areas, the hazards also amplify climate-related costs to the country’s physical assets, population, and the broader economy, the report states.

The IMF Fiscal Affairs Department undertook the study at the request of the Ministry of Finance and the Public Service of Jamaica, according to the report, which was prepared by Nicoletta Feruglio, Sandeep Saxena, and Sylke von Thadden-Kostopoulos. The staff was also supported by Letitia Li as research assistant.

The team collected data and information from key country stakeholders last December. Recommendations from the data and analysis followed in the spring of 2023.

During the mission, the staff met with officials from various government ministries as well as the Planning Institute of Jamaica, the Auditor General Department, the Office of Disaster Preparedness and Emergency Management, Rural Water Supply, the National Environment and Planning Agency, the National Water Commission, the National Works Agency, the Development Bank of Jamaica, the Jamaica Environmental Trust, and the Jamaica Social Investment Fund.

“Looking ahead, the expected damage from the hydrometeorological events would also be significant. For ‘one in 100 years’ type of events, the fiscal losses are expected to exceed US$1.73 billion, roughly about 10 per cent of GDP,” the IMF report stated. “In other words, there is one per cent probability in any year that losses will exceed US$1.73 billion from such an event.”

The size of the Jamaican economy for the calendar year ending December was $2.62 trillion. On a fiscal basis, for year ending March 2023, economic output was valued at $2.75 trillion, Statistical Institute of Jamaica data shows.

A storm causing damage at 10 per cent of GDP would beat all the hurricanes in two decades. The island in the 2000s experienced three sets of major storms each three years apart. Hurricanes Ivan in 2004 and Dean in 2007 wreaked US$580 million and US$329 million of havoc, which equated to 8.0 per cent and 3.0 per cent of GDP, respectively. Then in 2010, Tropical Storm Nicole caused damage of US$239 million or 2.0 per cent of GDP.

Temperatures hit a high of 95?Fahrenheit (35?Celsius) on Tuesday, July 11, according to Weather sites Accuweather and Wunderground. Heavy humidity accompanied the heat, which added another level of difficulty.

The IMF staff noted in the report that Jamaica has access to about US$660 million in natural disaster financing instruments spread across a range of options, inclusive of budget instruments, disaster-risk insurance, parametric insurance, and a contingent line of credit from international financial institutions.

The report described the access to financing as positive and coded it as ‘green’, which reflects the highest levels of resilience.

The country’s national and sectoral planning for disasters, and the use of land and property regulations, were both categorised as ‘yellow’, reflecting a medium score.

The low-ranked items included lack of coordination between agencies and government entities and between central and local government.

The report also found that Jamaica does not have a national disaster risk management strategy that analyses key climate risks to public property but noted that the existing disaster plans and laws address those risks.

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