A $100 million contingent loan facility from the Inter-American Development Bank (IDB) is expected to provide The Bahamas with “quick access to liquid resources” in the event of a national emergency.
According to the IDB, the loan won’t have any impact on the country’s debt level as the contingent financing is funded from the IDB’s ordinary capital.
“This proactive effort to strengthen The Bahamas’ natural disaster risk management strategy will not impact the national debt. Furthermore, this cross-sector institutional approach promotes good governance practice toward building and advancing environmental resilience in the country, providing timely and coordinated institutional responses and, most importantly, saving lives during emergencies,” the IDB noted in a statement.
“The contingent financing is funded from the IDB’s ordinary capital and includes a mechanism that gives The Bahamas the flexibility to draw funds from the existing IDB portfolio of current investment loans that have balances available for disbursement.
“The IDB support, through this instrument, is in line with the latest IMF Article IV recommendations that the country continue efforts to develop natural disaster ex-ante financial protection instruments to mitigate the impact of these events on the country’s public finances.”
According to the IDB, by providing ex-ante financing, this facility will help The Bahamas to broaden and deepen its financial strategy to address and recover from natural disasters that may occur in the future, thereby supporting the government’s immediate response capacity and protecting its fiscal balance.
“This loan facility is just one of a range of financial protection and risk transfer instruments that countries optimally seek to secure as part of an appropriate risk-layering strategy to cover probable losses from future hazard events of varying magnitudes,” the IDB stated.
“The executing agency will be the Ministry of Finance, through which the use of loan resources will be carried out by the public sector institutions responsible for budget execution during emergencies.
“Additionally, a specific condition of the country’s ability to continue to maintain access to the facility is the maintenance of a comprehensive disaster management program in which the country self-identifies the targets and improvements it seeks to achieve in five main policy areas: disaster risk management governance; risk identification; risk reduction; preparation for emergency and response; and financial protection and risk transfer.”