Financial Protection: Pacific Island Countries

Pacific Island Countries (PICs) are among the most vulnerable countries in the world, threatened by the risk of tropical cyclones, earthquakes and tsunamis that cause fiscal shocks and humanitarian crises. At the onset of a natural hazard event, Pacific Island Countries (PICs) require rapid-response, disaster risk financing instruments that provide immediate cash to cover emergency response and maintain basic public services. However, access to short-term liquidity is often constrained due to the small size of island economies, which in turn restricts their borrowing capacity and access to financial markets. Compounding this effect, PICs generally have limited budget reserves, which often force governments to reallocate public resources away from national development priorities – and can have adverse, long-term economic impacts. Without easy access to debt and robust financial markets, the ability of governments to quickly respond to provide humanitarian relief services is dramatically reduced.