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FEATURE STORY August 4, 2020

Facing drought, COVID-19 (Coronavirus), and hurricane season, Saint Lucia bolsters its disaster risk financing plans

If asked to describe the onset of COVID-19 in their countries, government officials around the world might answer that the pandemic hit “like a hurricane.” This sense of onslaught is certainly true for Saint Lucia, which has similarly been battling COVID-19 and dealing with the associated economic fallout, while also facing the yearly hurricane season.



Stories of Risk and Resilience: Addressing Disaster-Related Financial Concerns in Saint Lucia

Saint Lucia’s Director of Financial Administration discusses disaster-related financial concerns.

The Atlantic hurricane season officially runs from June 1 to November, and meteorologists predict an above normal season this year. In addition to the heightened hurricane risk, Saint Lucia, along with its neighbors in the Lesser Antilles, is in the midst of a drought. The country declared a “water emergency” on May 18.

Dealing with COVID-19 during a hurricane season and a drought can be particularly daunting for Saint Lucia, especially as the weather crises could exacerbate the health crisis.

Fortunately for Saint Lucia, the health-related impacts of COVID-19 has, so far, been limited. However, the economic consequences of the global pandemic have been serious.

Since tourism accounts for approximately two thirds of the country’s GDP, Saint Lucians acutely feel any disruption to that sector. So, when the government decided to close borders on March 23—a move that limited the virus’ importation and spread, but also effectively shut down the tourism industry—it led to severe economic impacts. Restrictions on related businesses such as restaurants and bars, as well as nightly curfews, have magnified the economic downturn.

“What we’re facing right now is a liquidity challenge,” says Nadia Wells-Hyacinth, Director of Financial Administration in the Ministry of Finance, Economic Growth, Job Creation, and External Affairs. “We've gotten a lot of support from the international community as relates to commitments to support the health response,” she says, but also notes that the government is now in need of financial support for non-coronavirus-related services that are now underfunded due to a depleted budget.

If there were ever a scenario that highlights the importance of a robust disaster risk financing strategy, this is it. In 2018, the World Bank, in collaboration with Saint Lucia’s Ministry of Finance, produced an analytical report that identified gaps and provided specific recommendations for strengthening the country’s disaster risk financing framework. Similar analyses were conducted for three other countries in the region under the World Bank’s Caribbean Disaster Risk Financing Technical Assistance Program—an initiative financed by the European Union under the Africa, Caribbean, Pacific - European Union Natural Disaster Risk Reduction Program, managed by the Global Facility for Disaster Reduction and Recovery (GFDRR).

Drawing from the report’s findings, Saint Lucia’s Cabinet of Ministers approved a Disaster Risk Financing Strategy in April 2018 to better prepare for future challenges. The government has already implemented a number of these measures, including increasing contingency reserves for disasters, improving the tracking of post-disaster spending, and piloting the Caribbean Oceanic and Aquaculture Sustainability Facility (COAST)—an insurance mechanism designed to reduce weather-related risk in the fisheries sector.

Future activities include finalizing a comprehensive inventory of public assets, building and maintaining a loss and damage database, and establishing a source for contingent credit—activities which are being supported by the UK’s Department for International Development. In addition, the EU’s Caribbean Regional Resilience Building Facility is supporting technical assistance in disaster risk financing of adaptive social protection measures. Saint Lucia has established a cross-sectoral working group to oversee the strategy’s roll-out and maximize effectiveness.

Learn how the World Bank is helping Caribbean countries build fiscal resilience.


Fortunately for Saint Lucia, two existing disaster risk finance instruments are already proving helpful during these difficult times. The first is the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company (CCRIF SPC), which allows countries in the Caribbean—and, since 2015, Central America—to purchase sovereign parametric disaster insurance at lowest-possible cost. Saint Lucia has recently renewed and increased its CCRIF SPC coverage.

The second instrument is the World Bank’s Contingency Emergency Response Component (CERC)—a provision built into the terms of certain development loans that makes it possible to rapidly reallocate funds for emergency-related needs.  Two World Bank-funded projects—the Saint Lucia Health System Strengthening Project and the Saint Lucia Disaster Vulnerability Reduction Project—have unlocked a combined US$10.5 million through activating their CERC provisions to aid Saint Lucia’s coronavirus response.

The coming months are challenging for Saint Lucia. Existing disaster risk financing instruments provide some contribution to Saint Lucia to weather these storms—both literal and figurative. The continued implementation of the Disaster Risk Financing Strategy should put the country’s finances in a better position to manage challenges in years to come.