Disaster in the framework of fiscal responsibility
GIVEN THE clobbering the Caribbean took from a string of storms in 2017, we are surprised at the seemingly muted preparation for this year’s hurricane season that is now officially into its sixth day. At least we had expected a greater sense of urgency on the part of government agencies in cleaning drains and gullies and in reminding people not only about the dangers of storms, but how to minimise their risks.
Maybe it is that we haven’t been paying sufficient attention and that there is no need for the flurry. The authorities may have been quietly going about their preparations all along. In which event, we are grateful.
But more profoundly, we hope that Jamaica, as well as the broader region, is spared a hit by any storm, of whatever magnitude. The human tragedy left by storms with names Harvey, Irma and Maria in places like Barbuda, the British Virgin Islands, the Dutch Antilles, Dominica and Puerto Rico are very grim reminders why we don’t want a repetition of 2017.
There is something else, too, why we worry about a storm striking Jamaica: its potential for disrupting the island’s nascent recovery, after last year’s growth of 0.5 per cent. Analysis by the International Monetary Fund office in Jamaica suggests a strong correlation between bullish performance in agriculture and overall growth. Agriculture suffered last year from adverse weather conditions.
Storms also tend to damage infrastructure, especially when, like much of Jamaica’s, it is not in great shape. Then they have to be repaired.
Indeed, last month, the finance minister, Nigel Clarke, produced data from a World Bank analysis showing that on 11 occasions between 1998 and 2012, the Jamaican Government had to spend between 0.5 per cent and two per cent of GDP to deal with natural disasters, most of which would have been the impact of flooding caused by storms. The estimated cost of the damage was far greater than the actual expenditure, which we interpret to mean that, at least on some occasions, restoration may not have been as full and complete as required.
UNPLANNED EXPENDITURE
As Dr Clarke noted, much of the repair bill would have been unplanned expenditure in circumstances where the Jamaican Government has little room for discretionary spending. Debtservicing costs and public-sector compensation, including pensions, although it has declined in recent years, consume 76 per cent of the Government’s budgetary spending. That leaves 24 per cent of the Budget for everything else the Government has to do, so when it is faced with natural disasters, such as hurricanes, things can go awry. Not only does the Government have to spend more, it has to do so at a time when its revenues are likely to be declining because of falling economic activity.
In the circumstances, governments in disaster-prone regions, including Jamaica’s, have to develop a mix of strategies to cushion the effect of catastrophes, including risk mitigation.
In that regard, Dr Clarke listed among his fiscal responsibility priorities the development of a “Public Financial Management Policy for Natural Disaster Risk, combined with a long-term operational plan for its implementation”. In other words, the fiscal cost of natural disasters will be baked into budgetary planning.
The time and circumstances are right, we believe, for Dr Clarke to be voluble on the issue, inviting responses to some of the funding ideas he placed on the table.
In the circumstances, governments in disaster-prone regions, including Jamaica’s, have to develop a mix of strategies to cushion the effect of catastrophes, including risk mitigation.