The Bahamas to build financial resilience against natural disasters with IDB support

$100 million contingent loan to enhance The Bahamas disaster risk financing plan

The Bahamas will strengthen its natural disaster risk financing plan and build resilience of its public finances against the impacts of climate change with a $100 million contingent loan from the Inter-American Development Bank (IDB).

The IDB financing is aimed at structuring a stable and efficient ex-ante financial coverage that will allow The Bahamas to pay for any extraordinary public expenses in a timely manner that could arise from emergencies caused by severe or catastrophic natural disasters. The operation will pave the way for the country to alleviate the impact that a severe or catastrophic natural disaster could have on its finances, by increasing the availability, stability, and efficiency of contingent financing to address emergencies.

Moreover, the operation seeks to enhance the country’s comprehensive disaster risk management by fostering improvements in five main policy areas: (i) disaster risk management governance; (ii) risk identification; (iii) risk reduction; (iv) preparation for emergency and response; and (v) financial protection and risk transfer.

Bahamas is highly exposed to natural hazards, particularly hurricanes; in the past 50 years, 18 hurricanes have hit its territory. Given the increasing intensity and frequency of extreme weather events associated with the impacts of climate change, in the last three years alone, three major hurricanes have made passage through the country and inflicted substantial damage. 

By providing ex-ante financing, the IDB is helping The Bahamas broaden and deepen its financial strategy to address and recover from natural disasters, supporting the government’s immediate response capacity and protecting its fiscal balance.

The IDB contingent financing has a maturity period of 25 years, a grace period of 5.5 years and an interest rate based on LIBOR.