GOJ sets aside $2 billion for disaster-risk coverage

In keeping with the requirements of the Fiscal Responsibility Framework, the Government has, for the first time, transferred $2 billion to the Contingencies Fund for spending should a natural disaster occur.

The Contingencies Fund is provided for in the Constitution and was established under Section 13 of the Financial Administration and Audit Act to provide for unforeseen expenditure of any kind. The aggregate ceiling of the Contingencies Fund was raised to $100 million in 1992, and it had a balance of $94 million as at March 25, 2019.

Finance and the Public Service Minister Dr Nigel Clarke moved a resolution on Tuesday to raise the ceiling of the fund from $100 million to $10 billion to provide space for future transfers related to natural-disaster risk coverage.

In taking the Third Supplementary Estimates for 2018-19, Clarke stated, “Jamaica’s economic independence is threatened by our vulnerability to natural disasters. We are therefore breaking new ground by making this transfer of $2 billion to the Contingencies Fund. We intend to supplement this amount with further transfers in future years, in accordance with the Financial Administration and Audit Act. The Contingencies Fund will be available to Jamaica in times of natural disaster and will be an important layer in our financing of natural-disaster risk.”

government’s intent

In his 2019-20 Budget presentation, Clarke outlined the intent of the Government to develop a policy for the financing of natural-disaster risk comprising several layers, including catastrophe bonds, contingent credit instruments, traditional insurance products like the Caribbean Catastrophe Risk Insurance Facility (CCRIF), fiscal savings in the Contingencies Fund, and the annual Budget.

Clarke noted, “Our history has been one where unplanned weather-related recovery expenditure has consistently diverted scarce resources away from social and economic development priorities. Invariably, vulnerable communities are the most affected, both from natural disasters and from diversion of planned budgetary expenditure. Financial planning and fiscal saving for the possibility of natural disaster is therefore not only consistent with our goal of economic independence, it also provides a much-needed safety net for vulnerable communities in times of natural disaster.”

He said that it was the intention of the Government to work with stakeholders to amend the Financial Administration and Audit Act to further specify the circumstances in which these fiscal savings can be drawn.