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Hurricanes are trapping small island nations in ever-deepening debt spirals

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By the time Beryl arrived, Grenada had already spent 20 years recovering from Hurricane Ivan (2004), a disaster that cost a whopping 200 percent of GDP and precipitated a debt crisis. In neighboring Dominica, Hurricane Maria (2017) caused damage worth 226 percent of GDP: One of the most indebted countries in the world.

Consider these numbers: can you imagine a remotely comparable event (other than nuclear Armageddon) that could cause damage on a similar relative scale in larger, wealthier states, and do so repeatedly?

Debt-Disaster-Debt

The flood waters continue to rise and the full impact of Beryl has yet to be assessed. But one thing is clear: the cost will be far greater than these countries and their citizens can afford. Disaster funds have been dug out in Grenada and St Vincent and the Grenadines, along with public funds. Appeals for cash donations to restore services, but the support will be insufficient and governments will have to take on even more debt for reconstruction.

Damaged fishing boats rest on the shore in Bridgetown, Barbados, after Hurricane Beryl passed through the island.Randy Brooks/Getty Images

These extremely high public debt burdens are Not because of fiscal wasteRather, they are an inevitable result of the debt-disaster-debt vicious cycle in which small island nations are trapped, constantly borrowing, often at a expensive trade rates—just to recover before the next hurricane hits.

This leaves less to spend on things like education, health care or infrastructure. To meet their development goals, small island developing states need to increase social spending by 6.6 percent of GDP by 2030. However, the costs of servicing and repaying debt devour an average 32 percent of revenues. In fact, in 23 of these states for which data are available, external public debt service payments are growing faster than spending on education, health care, and capital investment combined.

The rest of the world must help

Small island developing states cannot – and should not – be left to solve this problem alone. The international community has a historic responsibility and moral duty to help them escape the debt-disaster-debt cycle, and to fund basic services, invest in development and adapt to a changing climate.

Donors can do a number of things. They can provide aid, rather than loans, and much more. They can help island states access types of financing from which they are often excluded due to their deceptively high levels of per capita income (often skewed by one or two very wealthy residents).

Donors can help reduce the excessively high and unaffordable interest rates that island states have to pay on their debt. Our work demonstratesRich countries can offer immediate debt service cancellation (not deferral) after a Beryl-sized shock, to free up valuable fiscal space for relief and reconstruction.

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