The International Monetary Fund (IMF) has said that the revenue of the government of Dominica might take years to reach pre-Hurricane Maria levels.
A report published in the IMF’s newsletter for the Caribbean region said that although the government has “large reserves” from its Citizenship-By-Investment program and has received a payout of US$20 million from the Caribbean Catastrophe Risk Insurance Facility (CCRIF), its revenue will decline sharply in the near-term.
It said that reconstruction costs are likely to put unprecedented strain on public finances.
“Large government reserves from the Citizenship-By-Investment program, on top of the CCRIF payout, provide an immediate source of funds,” the report stated. “Nevertheless, government revenues are expected to decline sharply in the near-term, and to recover only gradually, lagging the recovery in economic activity and possibly taking years to reach pre-hurricane levels.”
The report added, “The success of the reconstruction effort will depend on meticulous prioritization, planning, and sequencing of action, and the availability of sufficient financing on appropriate terms.”
The report pointed out that debt financing alone is not enough to cover rehabilitation cost and might leave the island with an excessive burden of debt.
“Debt financing alone is unlikely to be sufficient to cover rehabilitation and reconstruction costs without leaving the country with an excessive debt burden. This highlights the importance of coordinated action by donors, international creditors, and development organizations to mobilize grants and concessional financing,” the report said. “To this end, Prime Minister Roosevelt Skerrit met with senior management of the International Monetary Fund and The World Bank during the 2017 Annual Meetings in Washington, DC.”
Hurricane Maria devastated Dominica on September 18, 2017 when the Category 5 Hurricane made landfall.
The island was still recovering from Tropical Storm Erika which struck in August 2015.
Maria caused severe damage, estimated at near 100 percent of GDP. The hurricane is reportedly Dominica’s worst natural disaster—with more than thirty deaths and damage estimated at US$1.3 billion (225 percent of GDP).
According to the IMF report, the government’s immediate response was focused on supporting displaced families and restoring basic services. All usable public buildings were recommissioned for use as shelters.
“The immediate need to clear debris from towns and roads was facilitated by the arrival of heavy-duty machinery from neighboring countries and main roads became usable days after the storm, facilitating the transport of basic supplies. Banks and credit unions resumed services swiftly,” the report noted. “The international community responded with humanitarian assistance and financial aid. Several Caribbean countries temporarily opened their borders to help shelter Dominicans. Dominica also received a payout of US$20 million from the Caribbean Catastrophe Risk Insurance Facility (CCRIF).”
The report added, “The government announced important aspects of its recovery plan. It intends to maintain pre- hurricane levels of government consumption, employment, and wages to allow access to basic needs. The plan also includes six months of tax exemptions on food and construction material imports. Given the significant damage to private housing, the government intends to provide substantial quantities of roofing materials and maintain temporary shelters while communities rebuild.To improve resilience, the authorities stand ready to enforce and review building codes. To help finance home rehabilitation, the government will offer advances on government salaries and on non-contributory pension payments from the Social Security Fund. The establishment of a consumer protection agency seeks to prevent wholesalers and retailers from taking unfair advantage of consumers.”
It said for Dominica to fully recover, significant effort is needed from its people and the international community.
“Looking forward, Dominica’s recovery will require considerable effort from its people, and significant support from the international community. A substantial private insurance payout is expected to facilitate the repair and reconstruction of private housing and structures,” the report stated.