IMF warns Saint Lucia to build buffers to deal with growing climate risks

Nov 18 (Reuters) – Saint Lucia’s economy will face growing risks of natural disasters linked to climate change, the International Monetary Fund (IMF) said on Friday, advising the Caribbean state to build up buffers despite financial constraints.

“Downside risks dominate,” he said in a statement, pointing to the pandemic, rising food and energy prices, more expensive imports, tighter financial conditions and rising oil prices. costs of natural disasters to the tourism-dependent small island nation.

Poor countries on the front lines of floods, droughts and more severe storms pushed at this month’s UN climate conference COP27 for rich countries to contribute to a ‘loss and damage’ fund to make in the face of the growing cost of climatic disasters. Countries like the United States and France have retreated.

The IMF projects that natural disasters will cost Saint Lucia about 0.7% of gross domestic product this year. Despite financial constraints, he underscored “the importance of developing a strong disaster insurance strategy while building structural resilience.”

The IMF encouraged the authorities to prioritize spending and increase the pass-through of global energy prices, while supporting vulnerable households with targeted transfers.

Fiscal policy should focus on protecting the most vulnerable from food and fuel price hikes, he said, noting that price controls and energy subsidies had somewhat mitigated the surge. raw material prices.

Without additional measures, the IMF expects the country’s public debt, which jumped to almost 97% of GDP during the pandemic, to stabilize around 90% in the medium term. “The public balance sheet remains under considerable pressure,” he said.

While the financial sector remained stable, the IMF noted that non-performing loans had increased during the pandemic and encouraged the authorities to address remaining anti-money laundering deficiencies to protect banking relationships.

St. Lucia’s high public debt limits its capacity for public infrastructure and social investment, even as it seeks to foster an inclusive recovery, the IMF said, warning of “significant challenges ahead”.

Reporting by Sarah Morland in Mexico City

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