The Inter-American Development Bank (IDB) has provided relief to Barbados in the form of a US$80-million contingent loan that will boost the country’s efforts to strengthen its financial risk management of natural disasters and extreme climate events.
The loan, approved yesterday, will provide Barbados with a stable, cost-effective, and quick access instrument that will cover immediate extraordinary public expenditures during emergencies caused by severe or catastrophic natural disasters.
As a small island developing state, Barbados, like other countries with its classification, is vulnerable to severe natural disasters and climate change. More than half of its residents live in zones of high risk from natural hazards, and the country generates four-fifth of its gross domestic product from economic activities in exposed areas.
“The country has historically been impacted to tropical cyclones and their associated effects, such as flooding and storm surges that put a large proportion of the population, residential and commercial buildings and productive infrastructure at high risk, as the country’s coastal zone is densely populated, and the economy is driven by beach tourism,” the IDB noted in a release.
As such, the loan programme will offer parametric insurance coverage for hurricanes and excess rainfall associated to cyclonic systems, based on their intensity and impact on the population, thus helping Barbados build financial resilience to disaster and climate risks.
The IDB, therefore, pointed out that the beneficiaries of the loan will be the Bajan population, in general, and the affected population that receives emergency assistance under the coverage.
“In addition, the programme will promote improvements in the country’s comprehensive natural disaster risk management, including its response and preparedness capacity to natural disasters,” the bank added.
With a tenor of 25 years and interest rate calculations based on LIBOR, the contingency loan has a five-and-half-year grace period.