The Contingencies Fund that the government set up in 2017 has a balance of EC$61 million, Minister of Finance Camillo Gonsalves said in the Budget Address on Monday, noting the controversy surrounding the establishment of the fund.
Gonsalves noted that the fund is capitalised by a tax on consumption, and a levy on visitor accommodation.
“We have never before had more money set aside to respond to a rainy day,” he told Parliament.
He said the Contingency Fund is now better financed than the World Bank-funded US$20 million Catastrophe Deferred Drawdown Option (Cat DDO) that the government used after the eruption of La Soufriere volcano in 2021.
“However, that US$20 million was an essential tool in our response to the volcanic eruptions,” he said.
Gonsalves explained that to operationalise a Cat BDO, the government tells the World Bank that it would not use the full amount of money that the country is entitled to borrow for projects.
Instead, the government asked the World Bank to set aside the unused portion so that the country could draw down immediately in the wake of a disaster.
“And immediately in this case meant within two days,” Gonsalves said, adding that the government is in negotiations with the World Bank to make another Cat BDO available to the country, “essentially complementing our own $61 million Contingencies Fund with a further $54 million to be accessible in the wake of a natural disaster.
“This is prudent planning and preparation,” the finance minister said. “There is a lot that we could do with $150 million today. And like I said, there is $61 million sitting in the bank. But we must make the difficult decisions to balance the needs of today. with the challenges of tomorrow.
“This government has amassed vast experience in what it takes to prepare for and respond to a natural disaster. We are certain that we must continue to build up buffers and reserves to help us prepare for the next inevitable flood, drought storm, hurricane eruption or other disaster.”
The minister discussed the Contingencies Fund in the context of the climate crisis, its impact on the country and the response of the international community.
“Budget 2024 is a budget crafted in the shadow of intensifying climate change, global foot-dragging and urgent adaptation needs for the people of St. Vincent and the Grenadines,” he said of the EC$1.6 billion fiscal package.
He said the budget allocates $92.8 million to Environmental Protection, the second largest allocation of the EC$805,640,573 capital budget.
“In reality, our expenditure on climate adaptation is much higher,” he said, adding that many of the country’s existing infrastructure projects are in direct response to climate realities or included a critical climate adaptation component.
He spoke of the EC$21 million to be spent this year on the Natural Disaster Management project and $11 million allocated to begin protecting half a mile of the most vulnerable coastline in Sandy Bay, on the north-eastern coast of St. Vincent.
“Last year, we conceded ground to the invading seas in one small battle along our long coastal frontline,” he said, referring to a 750-foot stretch of the Windward Highway at Shipping Bay, where the road had to be shifted inland.
The finance minister said EC$1.9 million has been allocated to this, adding that at the same location, the South Windward Coastal Works Project will complete 210 feet of coastal defence to help stave off further losses.
“This one corner of one road less than a quarter mile long, will consume $3.4 million in expenditure to protect it from coastal erosion,” Gonsalves said. “It is a microcosm of our ongoing war against the elements and our efforts to protect us all from the worst impacts of climate change.”
He said a similar programme is taking place in northern Grenadines island of Bequia, where works are underway along the coast of Paget Farm.
“Budget 2024 continues our concerted multi-year quest to protect people and property from increasingly frequent floods, with river defence projects at Camden Park, Clare Valley, Cumberland, Layou and Yambou among many others,” Gonsalves said.