EC$76 million put aside for use in the event of a disaster
St Vincent and the Grenadines (SVG) has put aside approximately EC$76 million to be used in the event of a natural disaster.
“God forbid if something happen, Ralph have a little kitty,” Prime Minister Dr Ralph Gonsalves said while speaking on We FM on Monday morning.
Gonsalves was referring in part to the World Bank’s Board of Executive Directors approval of US$40 million for the Second Fiscal Reform and Resilience Development Policy Credit with Catastrophe Deferred Drawdown Option (Cat DDO) for SVG.
The quick-disbursing operation supports the country’s program to strengthen fiscal sustainability and enhance climate and disaster resilience to future shocks. It also supports SVG’s response to the COVID-19 pandemic.
Half of the money, US$20 million, the Cat DDO component, provides a contingent line of financing in case of future natural or health-related disasters while the other US$20 million can be used right now for whatever the government needs it for.
The money must be paid back over 40 years and has a 10-year grace period at 0 per cent interest rate. The financing is from the International Development Association (IDA).
“The thing is like a grant. I put it aside because I don’t know what is going to happen with the storms. You have a lot of infectious diseases swirling around, you saw what is happening with the Sahara dust, you know what is happening with climate change, you see what is happening with COVID, and we not out of the woods yet,” Gonsalves told radio listeners.
He said the government negotiated for the US$40 million, over a few months, but not to be able to spend the entire amount at once.
The US$20 million for national disasters, amounts to EC$54 million. This is strengthened by EC$22 million from the government’s contingency fund.
The contingency fund is funded by a US$3 hotel room tax and one per cent of the Value Added Tax (VAT). Over the last two and a half years, the contingency fund has accumulated EC$32 million, EC$10 million of which was used to help with the government’s COVID-19 response.
The Prime Minister said the remaining EC$22 million has been added to the recently approved EC$54 million from the World Bank, which brings the funds available for response, in case of natural disasters, to EC$76 million.
“Remember last year that when the opposition was complaining that I was coming to Parliament with a number of Bills including submitting things like, the fiscal sustainability framework which was incorporated into the Budget, dealing with a number of reforms in the tax procedures, matters concerning procurement, a number of reforms…to strengthen our fiscal consolidation and for strengthening transparency and accountability,” Gonsalves said.
He said that while persons may say, “take all the money to spend one time,” that is not a wise thing to do.
“We have to be mindful that this [hurricane] season, it is expected to be more active than last year, so we have to be prepared,” Gonsalves said.
The Cat DDO funds will be available to be partially or fully drawn down after a declared emergency within the next three years and it can be renewed for an additional three years.
“I could draw down that money if I declare a natural disaster under the National Emergency Management Organization Act which was passed many years ago,” Gonsalves explained.
He noted that the government, on April 7 this year, amended the Public Health Act with the provision to declare a public health emergency.
The Prime Minister said that he could declare a public health emergency, on proper advisement, so the government can access the World Bank monies.
Tahseen Sayed, World Bank Country Director for the Caribbean commented last week, “This operation supports the efforts of Saint Vincent and the Grenadines to maintain fiscal resilience and protect lives and livelihood during the COVID-19 pandemic, which has led to severe socio-economic impacts.”
She noted also that the contingent financing component protects people against the effects of a natural disaster and helps the country become more disaster resilient.
The World Bank also noted that SVG has been affected by loss of economic activity due to the COVID-19 prevention measures while the country is also at high risk of natural hazards, especially hurricanes.
“This new financing supports reforms that strengthen the legal and institutional frameworks for disaster risk management, protect jobs and livelihoods, and enhance fiscal resilience. The operation also supports reforms to protect the country’s coastal and marine assets by supporting sustainable use of natural resources,” the Bank said in a release.
The money is the second in a series of two fiscal resilience development policy credits for SVG.