Presentation delivered by Mr. Jason Cotton, Economist, CDB at the seminar titled, "Measuring Vulnerability and Resilience for Small States: The Recovery Duration Adjuster" on June 15, 2022 in Turks and Caicos Islands. The seminar was part of the Bank's 52nd Annual Meeting activities.

1. THE RECOVERYDURATION
ADJUSTER: MAKINGTHE MVI
BETTER
Caribbean Development Bank

2. RDA: Making the MVI Better

3. Finance eligibility criteria and
systems are often not suited
to the unique challenges and
constraints of small states.
These criteria depend mainly
on Gross National Income
(GNI) per capita as the
measure of vulnerability and
economic development in a
country.
Even when small states have achieved
high levels of GNI per capita, there are
significant challenges after exogenous
shocks, from:
Underlying structural weaknesses
Limited implementation capacity
High debt levels
Insufficient investment in resilient
infrastructure and institutions

4. Bridging the Gap Between Stabilisation
and Long-term Development
Investment Growth
Framework
Resilience-Building
Framework
Debt Sustainability
Framework

5. Development is a Holistic Concept
INITIAL
POSITION
Structural
Deficiencies
in Resilience
Dimensions
PARTIAL
DEVELOPMENT
Advancement in
one Resilience
Dimension
HOLISTIC & SUSTAINABLE
DEVELOPMENT
No Dimension left Behind

6. Distinguish Purposes of Finance
FINANCING FOR
RESCUE
FINANCING FOR
RECOVERY
FINANCING FOR
REPOSITIONING
- Emergency Policy-
based Loans.
- Caribbean
Catastrophe Risk
Insurance Facility
(CCRIF).
- Insurance-Linked
Securities.
- Policy-based
Operations.
- Precautionary and
Contingent Credit
Facilities.
- SDG Themed Bonds.
- SDR-denominated
Resilience Bonds.
- Contingent Debt
Instruments that price in
reforms.
- Concessional finance.
- Private Equity

7. A vulnerability metric for
SIDS should go beyond
susceptibility. Although
countries may face a
similar likelihood of a
hazard occurring, their
ability to recover to pre-
event welfare levels can
vary vastly.

8. Recent Caribbean Natural Disasters
Hurricane Maria,
Dominica
(September 2017)
The Category 5 storm resulted in
Total damages of US$931 million
and losses of US$382 million which
amounted to 226% of 2016 gross
domestic product (GDP). Identified
recovery needs for reconstruction
and resilience interventions
amounted to US$1.37 billion.
(World Bank)
La Soufriére volcanic
eruption in St. Vincent
and the Grenadines
(April 2021)
Prime Minister Gonsalves estimates
the volcano caused $150 million in
infrastructure damage and $150
million in agriculture and housing
losses. (Bloomberg, 2021)
Haiti’s 7.2
Earthquake
(August 2021)
Results of the assessment of the
effects...indicate a total amount of
$1.62 billion in terms of damage
and losses. (UNDP, 2021)
Hurricane Dorian
in the Bahamas
(September 2019)
The estimated damages and losses
amount to 3.4 billion. (IDB, 2019)

9. Florida vs Dominica
Both susceptible to a
category-5 hurricane
But who do you think
will rebound faster?

10. The CDB Approach
RECOVERY
DURATION
ADJUSTER
VULNERABILITY AND
RESILIENCE FRAMEWORK
This forward-looking framework is being
developed to integrate resilience into
growth and debt frameworks, and promote
criteria to enhance access to finance for
SIDS.

11. Partial Approach
Index
Fixed/Static
Backward Looking
Point in Time Measure
No Duration of Recovery
Holistic & Multidimensional Approach
Framework: Customise Specific Shocks
to Country Situations
Real-time: Evolving Vulnerability,
Dynamic, Adaptive, Nimble
Forward Looking
Internal Resilience Capacity (IRC)
• Initial Conditions
• Change in Vulnerability/Resilience
• Access to Finance
Duration of Recovery
• To Access Concessional Finance

12. The Recovery Duration Adjuster Vulnerability
And Resilience Framework
• Endogenous
• Exogenous
SHOCKS
• Economic
• Social
• Environmental
VULNERABILITY
Magnitude
and Severity
EVENT
INTERNAL
RESILIENCE
CAPACITY
•InitialConditions
•Access toFinance
SHOCK
ABSORBING
POLICY
•Financial
Resilience
•Social
Resilience
•Institutional
Resilience
•Climate
Resilience
•Productive
Capacity
Resilience
COMPENSA
TING
VARIA
TION
RECOVERY
DURATION
ADJUSTER
(RDA)
TRADITIONAL
MEASURE
GNI RDA
MEASURE
GNI
ACCESS
TO
FINANCE
NOT ADEQUATE
MORE APPROPRIATE

13. Diagrammatic Illustration: Duration Gap
Figure 1:
Illustrating the
effect of a
shock on
growth and
investment
in SIDS

14. Figure 2:
Illustrating the
effect of
multiple
shocks on
growth and
investment in
SIDS
Diagrammatic Illustration: Multiple Shocks
Longer Duration

15. Where:
Methodological Approach

16. Where:
Methodological Approach

17. Mathematical Derivation

18. The Recovery Duration Adjuster Vulnerability
And Resilience Framework

19. The Recovery Duration Adjuster Vulnerability and Resilience Framework:
“Towards the possibility of moving from GNI to IRC”

20. Vulnerability And Resilience Assessment Tool
PRODUCTIVE
CAPACITY
RESILIENCE
Advancing
digitalization;
Leveraging
knowledge creation;
Economic
diversification
SOCIAL
RESILIENCE
Building Human
Resources; Health
care; Social
Protection and
Labour; Gender
Equality
ENVIRONMENTAL
RESILIENCE
Climate change
adaptation;
Promoting
sustainable energy;
Environmental
Sustainability
INSTITUTIONAL
RESILIENCE
Property Rights & Rule-
based Governance;
Quality of Public
Administration; Quality
of Budgeting and
Financial Management
FINANCIAL
RESILIENCE
Diversified Financing
Ecosystem; Strong
regulatory
environment
Policy/Institutional Performance Criteria

21. Financing Ecosystem –
Innovative financing
instruments (Rescue,
Recovery, Repositioning)
underpinned by a strong
regulatory environment
and well-developed
financial market
infrastructure.
Legend:
y – GNI income thresholds
Y* – IRC income thresholds
LIC – Low Income Country
LMIC – Lower Middle-Income
Country
UMIC – Upper Middle-Income
Country
HIC – High Income Country
The Recovery
Duration Adjuster
Vulnerability and
Resilience
Framework:
“Towards the
possibility of
moving from GNI
to IRC”

22. STRATEGIC PARTNERSHIPS
The CDB
intends to pilot a
prototype of its
RECOVERY
DURATION
ADJUSTER
Developing and refining the
methodology will require
collaboration with Strategic
Partners to ensure that small
states are given a vulnerability
and resilience measurement
system that considers all the
factors impacting the welfare of
their citizens.

23. THANK YOU