~Countries should develop national climate adaptation strategies ~
WILLEMSTAD/PHILIPSBURG – “The Caribbean basin is the most exposed region to climate-related natural disasters. Hence, the occurrence of extreme weather events, which are expected to increase in frequency and severity due to climate change, can be considered a permanent risk to the economic outlook for Curaçao and Sint Maarten”, declared the president of the Centrale Bank van Curaçao en Sint Maarten (CBCS), Richard Doornbosch, in the CBCS’s 2023 December Economic Bulletin. “Despite challenges in the areas of risk assessment and measuring costs, both countries should put climate change, specifically climate change
adaptation, high on their policy agendas. After all, the extent of the damage caused by climate change in the future depends on the policy choices we make today”, he added.
Doornbosch used the last experience in Sint Maarten with Hurricane Irma in 2017 to underscore the reality that natural disasters can be devastating and extract a high economic toll. “The total estimated damage from that catastrophic category 5 hurricane to Sint Maarten is over NAf.3.7 billion. In addition, the hurricane worsened Sint Maarten’s fiscal stance as reflected by an increase of the current budget deficit by 1.4 percentage points and the public debt-to-GDP ratio by 9.2 percentage points between 2017 and 2018”, he explained. “Notwithstanding the NAf.1.0 billion that was allocated for the reconstruction of Sint Maarten by the government of the Netherlands in the Sint Maarten Reconstruction, Recovery and Resilience Trust Fund at the World Bank, the government of Sint Maarten had to incur liquidity loans from the Dutch State to finance its operations. Today, these loans represent approximately 13% of Sint Maarten’s total public debt stock”, he added.
In the Bulletin, Doornbosch recommended both countries develop a comprehensive national climate adaptation strategy that should also be integrated into the governments’ long-term planning and fiscal frameworks. He also noted that, apart from the serious threats that climate change poses, it can also offer growth opportunities with investments in resilient infrastructure and the transition towards renewable energy. Doornbosch emphasized that the national adaptation strategy should include actions such as the development of and investment in climate-resilient infrastructure. In addition, both countries need to prioritize the collection of new data and foster collaboration between local and international stakeholders to exchange existing data that are relevant to assess climate-change risks and measure its economic impact. Furthermore, Curaçao and Sint Maarten should implement an education strategy that creates more awareness, sensitivity, and responsibility of society regarding climate change and environmental sustainability.
Finally, efforts should be taken to accelerate the transition to renewable energy by tapping into the possibilities that our national resources, i.e., sea, sun, and wind, offer.
As the CBCS acknowledges the relevance and implications of climate change for monetary policy and financial stability, it has incorporated climate change effects into its strategic plan for the period 2022 – 2025 with the objective to identify and assessing the consequences and risks related to climate change for the monetary union. Furthermore, by practicing corporate social responsibility, the CBCS wants to contribute to a more sustainable economy. “The CBCS is making efforts to identify and assess the financial risks to the financial sectors of Curaçao and Sint Maarten in general and its supervised institutions in particular. Also, a vision of how to address these risks will be formulated”, Doornbosch explained. “The CBCS is taking action along three pillars. First, cooperation and dialogue with local and international institutions to strengthen climate change awareness and encourage economic initiatives around renewable energy. Second, conduct research on climate risk and improve climate-related data and statistics. Third, develop a robust supervisory framework for climate change that is relevant in the Caribbean small state context and can facilitate climate stress testing. This will be done in collaboration with regional supervisory authorities and the IMF/CARTAC”, the CBCS president concluded.
The complete text of the December 2023 Economic Bulletin is available on the CBCS website at
https://www.centralbank.cw/publications/economic-bulletins/2023.
Willemstad December 13, 2023
CENTRALE BANK VAN CURACAO EN SINT MAARTEN
