When Beryl arrived, Grenada had already spent 20 years recovering from Hurricane Ivan (2004), a disaster that cost a staggering 200 percent of GDP and led to a debt crisis. In neighboring Dominica, Hurricane Maria (2017) caused damage worth 226 percent of GDP: Currently one of the most indebted countries in the world.
Consider these numbers: Can you imagine a remotely comparable event — tiny of nuclear Armageddon — that could cause similar damage to larger, wealthier nations and do so repeatedly?
Debt-disaster-debt
Floodwaters remain, and the full impact of Beryl has not yet been assessed. But one thing is clear: the costs will be much higher than these countries and their citizens can afford. Disaster relief funds have been vacuumed up in Grenada and St. Vincent and the Grenadines, alongside public appeals for monetary donations to restore services, but this support will be insufficient and governments will have to take on even more debt to rebuild activities.
Damaged fishing boats rest on the shore in Bridgetown, Barbados, after Hurricane Beryl passed over the island.RANDY BROOKS/Getty Images
These extremely high public debt burdens are not because of financial extravagance. They are rather the inevitable result of the vicious cycle of debt-disaster-debt in which miniature island states are stuck, constantly borrowing – often for expensive commercial rates—just to make it before the next hurricane arrives.
There is less to spend on things like education, healthcare, and infrastructure. To achieve their development goals, miniature island developing states need to escalate social spending by 6.6 percent of GDP by 2030. However, the cost of servicing debt and repaying absorb on average 32 percent of revenues. Indeed, in 23 of the states for which data are available, payments for services on the external public debt are growing faster than spending on education, health, and capital investment combined.
The rest of the world needs to facilitate
Compact Island Developing States cannot — and should not — solve this problem alone. The international community has a historic responsibility and moral obligation to facilitate them escape the debt-disaster-debt cycle and fund basic services, invest in development, and adapt to a changing climate.
Donors can do many things. They can provide aid instead of loans and much more. They can facilitate island states access types of finance from which they are often excluded because of their misleadingly high levels per capita income (often distorted by one or two very prosperous residents).
Donors can facilitate reduce the excessively high and unprofitable interest rates that island nations have to pay for their debts. And as our work showsLuxurious countries can provide immediate debt service relief (not deferral) after a shock of Beryl’s scale to free up valuable fiscal space for relief and reconstruction.