World Bank Assistance for Disaster Risk Management in the Caribbean

Introduction to the Project

WASHINGTON, CMC—The World Bank will provide assistance to three Caribbean Community (CARICOM) countries for disaster risk management projects.

The Washington-based financial institution said the US$70 million Disaster Risk Management Development Policy Financing project will assist St. Lucia, Barbados, St. Vincent, and the Grenadines.

St. Lucia’s Project

According to the World Bank, the US$20 million project for St. Lucia will help the country quickly access financial resources in case of an emergency, allowing it to respond faster and support its people.

“The high costs of recovery and reconstruction following a natural disaster strains public finances, contributes to increased debt, and limits countries’ ability to invest in development and higher living standards,” said Lilia Burunciuc, World Bank Division Director for the Caribbean.

“This project helps St. Lucia address these challenges by advancing key reforms and providing rapid access to financing in the event of a disaster. It also reduces the need for costly emergency borrowing and enables faster, more fiscally responsible recovery, benefiting all St Lucians,” she added.

The project will enhance St. Lucia’s capacity to prepare for and respond to natural hazards and health-related crises. It includes a Catastrophe Deferred Drawdown Option (Cat DDO) – an innovative World Bank financing instrument – that will provide a fast-access line of credit to support a timely and effective response once an emergency is declared.

Risks and Challenges in St. Lucia

“This milestone comes as St.Lucia continues to confront growing risks. Located in the hurricane belt, the island is increasingly vulnerable to extreme weather events, including hurricanes, floods, landslides, and droughts—many of which are intensifying,” the World Bank said.

The estimated annual losses from hurricanes alone amount to nearly US$9.5 million in damage to the island’s building stock, representing approximately 0.4 percent of its 2023 gross domestic product (GDP).

“With nearly half of the population in St. Lucia living within five kilometers of the coastline, the risk to people and property is rising. These hazards strain government finances and jeopardize key economic sectors such as tourism and agriculture while disproportionately affecting the most vulnerable.”

Policy Reforms in St. Lucia

The World Bank said that in response to these escalating risks, the Cat DDO offers St. Lucia immediate liquidity in times of disaster. To access this contingent line of credit, St. Lucia has completed a targeted set of policy reforms structured around two main pillars: strengthening physical and data infrastructure for climate and disaster risk management and improving the country’s financial readiness to respond to future shocks.

As part of the first pillar, the government took steps to update and implement physical planning regulations that promote safer land development and will ensure that risk-informed standards guide new infrastructure and urban expansion.

The second pillar focuses on increasing St. Lucia’s fiscal resilience.

The government has adopted Public Asset Management regulations for public inventory to evaluate and monitor the condition and vulnerability of public infrastructure. At the same time, a new Disaster Risk Financing Strategy was adopted, outlining financial instruments and policies that can be used to manage the economic fallout of disasters better.

Barbados’ Project

In Barbados, the US$30 million Disaster Risk Management Development Policy Loan will help the country build stronger systems for managing natural disasters and health emergencies.

The Washington-based financial institution said that this project arrives at a critical time for Barbados, noting that despite its strong economic recovery, the country remains highly vulnerable to natural hazards.

In 2024, Hurricane Beryl passed within 150 kilometers of the island, causing damage estimated at 1.4 percent of GDP and severely affecting the fisheries and tourism. Rising sea levels and stronger hurricanes are predicted to intensify risks in the years ahead. Public health emergencies, such as the COVID-19 pandemic, have also shown the importance of having reliable, flexible funding to respond rapidly and protect essential services.

“Barbados, like many small states, is working to build resilience amidst severe and growing shocks. The Catastrophe Drawdown Option will strengthen the country’s ability to respond swiftly when disasters strike and protect its people and communities,” said Burunciuc.

St. Vincent and the Grenadines’ Project

The World Bank’s assistance to St. Vincent and the Grenadines amounts to US$20 million, supporting comprehensive policy reforms to enhance national preparedness and resilience. It includes the Cat DDO and builds on previous initiatives, including the Second Fiscal Reform and Resilience Development Policy Credit with a Cat DDO, which provided critical financing in the aftermath of the La Soufrière volcanic eruption in 2021.

The bank said that while St. Vincent and the Grenadines have made substantial progress in recent years, significant vulnerabilities remain.

“More frequent and intense storms, shifting rainfall patterns, and worsening coastal erosion are placing a growing strain on infrastructure, ecosystems, and livelihoods. Prolonged droughts affect water security and agriculture, and the combination of steep terrain and unregulated development increases the likelihood of landslides and flash flooding.

“These compounding pressures threaten public safety, disrupt essential services, and reveal gaps in disaster preparedness and long-term planning. This was also demonstrated by the impact of Hurricane Beryl, the most powerful hurricane to impact the country since 1875, which made landfall on July 1, 2024, causing estimated economic damage of US$230.6 million, 22 percent of its 2023 GDP.”

Financing and Support

The projects are financed by the International Development Association, the arm of the World Bank Group, which supports low-income countries and small island economies. IDA’s grants and low-interest financing help countries invest in their futures, improve lives, and create safer, more prosperous communities worldwide.

Technical assistance was provided for the policy reforms with financial support from the European Union through the EU Resilient Caribbean Programme and the Canada-Caribbean Resilience Facility, managed by the Global Facility for Disaster Reduction and Recovery and the Caribbean: Strengthening Fiscal Risk Management Trust Fund.

Contributing countries include the United Kingdom, Germany, France, Japan, Canada, the Netherlands, the European Commission, Norway, Australia, and the United States.

Conclusion

The World Bank’s assistance to St. Lucia, Barbados, and St. Vincent and the Grenadines will help these countries build resilience and better prepare for natural disasters and health emergencies. The projects will provide critical financing and support policy reforms to enhance national preparedness and resilience.

Frequently Asked Questions (FAQs)

Q: What is the purpose of the World Bank’s Disaster Risk Management Development Policy Financing project?

A: The project aims to assist St. Lucia, Barbados, and St. Vincent and the Grenadines in building resilience and better preparing for natural disasters and health emergencies.

Q: How much financing will each country receive?

A: St. Lucia will receive US$20 million, Barbados will receive US$30 million, and St. Vincent and the Grenadines will receive US$20 million.

Q: What is the Catastrophe Deferred Drawdown Option (Cat DDO)?

A: The Cat DDO is an innovative World Bank financing instrument that provides a fast-access line of credit to support a timely and effective response once an emergency is declared.