Multiple disasters and debt sustainability in Small Island Developing States

This paper estimates the impact of multiple disasters on debt sustainability indicators in Small Island Developing States (SIDS) over the period 1980 to 2018 in order to provide policy makers with tools to maintain debt sustainability.

Applying a fixed-effects and a Synthetic Control estimator, the results indicate an only weak correlation between a severe natural disaster and external debt what can be related to the restrictions of already highly indebted SIDS to access adequate financing. The paper discusses the implications for financing stronger resilience to disasters in the future and calls for stronger multilateral cooperation and greater flexibility in the accessibility to pre- and post-disaster financial instruments.