Fiscal Buffers for Natural Disasters in Pacific Island Countries

Hidetaka Nishizawa, Scott Roger and Huan Zhang

No 2019/152, IMF Working Papers from International Monetary Fund

Abstract: Pacific island countries (PICs) are vulnerable severe natural disasters, especially cyclones, inflicting large losses on their economies. In the aftermath of disasters, PIC governments face revenue losses and spending pressures to address post-disaster relief and recovery efforts. This paper estimates the effects of severe natural disasters on fiscal revenues and expenditure in PICs. These are combined with information on the frequency of large disasters to calculate the rate of budgetary savings needed to build appropriate fiscal buffers. Fiscal buffers provide self-insurance against natural disaster shocks and facilitate quick disbursement for recovery and relief efforts, and protection of spending on essential services and infrastructure. The estimates can provide a benchmark for policymakers, and should be adjusted to take into account other sources of financing, as well as budget risks from less severe as well as more frequent disasters.

Keywords: WP; private sector; real GDP; government expenditure; Natural Disasters; Pacific Islands Countries; Fiscal Cost; Fiscal Buffers; PIC government; contingent government liability; government cash buffer; government financing source; financial support; Fiscal space; Disaster aid; Budget planning and preparation; Pacific Islands (search for similar items in EconPapers)
Pages: 31
Date: 2019-07-12
New Economics Papers: this item is included in nep-dev and nep-mac
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Citations: View citations in EconPapers (1)

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