Breaking the Disaster-response Cycle in SIDS: Aligning Financing to Urgent Climate Action

This policy brief focuses on the specific issue of disaster-response for three reasons. First, the disaster-response cycle describes a well-documented pattern of fiscal surge and a crowding out effect over much needed adaptation investments; second, climate vulnerability will only increase the volatility of this cycle in the future, threatening both the prospects for sustainable and inclusive growth as well as an increasingly untenable trajectory for fiscal sustainability; and third, because fiscal and financial capital flows to SIDS pose a challenge to the international financial architecture at large. The characteristics of the problem are known, as well as the size of the fiscal and financial burdens; this is a problem that would not be a problem if the incentives for public and private capital flows were aligned in the right direction. This presents a challenge for the multilateral system at large.