The Caribbean stands at a pivotal moment. Realising the region’s substantial development potential will require mobilising investment at far greater speed and scale. Caribbean Development Dynamics 2026: Investing in Sustainable and Resilient Development examines how Caribbean countries can strengthen sustainable and resilient growth by increasing both the quantity and the quality of investment amid heightened climate risks, fiscal constraints and enduring structural vulnerabilities. The report focuses its analysis – with different levels of data availability – on 16 Caribbean countries: Antigua and Barbuda, Barbados, The Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago. These 16 countries are part of the 39 SIDS. The report analyses them alongside the Latin America and OECD averages. When relevant, the analysis also incorporates the perspective of the “Greater Caribbean”, including other countries and territories in the Caribbean basin.
Caribbean Development Dynamics 2026
The region is increasingly exposed to climate hazards, although its contribution to global greenhouse gas (GHG) emissions is among the lowest worldwide
Climate vulnerability in the Caribbean remains high. All Caribbean countries1 on average, are more exposed to climate-related risks than OECD Member countries, and a majority also display higher vulnerability than Latin American peers, according to standard vulnerability indicators. Caribbean countries experienced 357 climate-related extreme weather events between 1980 and 2024, an 84% increase between 2004 and 2024, relative to the previous 20 years (Figure 1, Panel A). Over 24 million people were affected in the last four decades. Moreover, annual climate-related damages have accounted for an average of 2.13% of gross domestic product (GDP) across Caribbean countries during that period. Climate disasters in Dominica (2015) and Grenada (2004) resulted in losses equivalent to 225% and 200% of their respective GDPs (Ötker and Srinivasan, 2018[1]). The impact of Hurricane Melissa (October 2025) was estimated at USD 12.2 billion in Jamaica, representing 56.7% of the country’s GDP (Jamaica Information System, 2026[2]). It also caused severe damage in The Bahamas, Cuba, the Dominican Republic and Haiti (IBRD/World Bank, 2025[3]). Meanwhile, regional GHG emissions were 8.1 Mt CO2e in 2023, 45 times lower than the OECD average and 24 times lower than Latin America, even when accounting for differences in population, land area and GDP (Figure 1, Panel B). This disparity underscores the continued relevance of the principle of common but differentiated responsibilities in global climate action.
The share of renewables in the Caribbean’s electricity matrix remains low, and there is potential to develop these sources of energy. The low share of renewables is associated with structural economic vulnerabilities (including small and fragmented energy grids or a lack of economies of scale), and the low capacity of many governments to implement and scale up projects quickly. Moreover, high water stress and inefficient water use remain key environmental challenges, although some countries are making notable progress towards more effective water management. In 2022, the average water-stress level for the Caribbean stood at 20%, similar to the OECD average and 12 percentage points higher than in Latin America. Nonetheless, most water-stressed Caribbean nations, such as Barbados and Trinidad and Tobago, are also among the most efficient users. This highlights the importance of combining strong national policy with targeted international investments to address water security and management.
Note: Panel A: Disasters are considered as events that overwhelm local capacity, necessitating a request to the national or international level for external assistance; an unforeseen and often sudden event that causes great damage, destruction and human suffering. The graph considers only climate-related events such as droughts, floods, storms, extreme temperatures and wildfires. Geophysical events (earthquakes and volcanoes), technological events (industrial accidents), and biological events (including epidemics, insects, or animals) are recorded in EM-DAT but are excluded from the scores because they are not directly associated with climate change. Panel B: Greenhouse gas (GHG) emissions are measured in million tonnes of CO2 equivalent (Mt CO2e). It includes emissions from fossil CO2, methane (CH4), nitrous oxide (N2O) and fluorinated gases (F-gases). Sectors shown are agriculture, energy (includes buildings, fuel exploitation and power industry), industry (including industrial combustion and processes), transport and waste. Indirect emissions are not shown due to their minimal contribution at the aggregate level.
Source: Authors’ elaboration based on data from EM-DAT (2025[4]), EM-DAT Database, https://doc.emdat.be/ (Panel A); and EDGAR (2025[5]), Emissions Database for Global Atmospheric Research, https://edgar.jrc.ec.europa.eu/ (Panel B).
Macroeconomic conditions are characterised by modest potential growth and low productivity
Over the past decades, Caribbean countries have struggled to sustain high growth rates in potential GDP per capita, averaging an estimated 1.4% in 2025 (Figure 2). This is below the level observed in advanced economies (which, on average, recorded a potential GDP per capita growth of 1.8%) but above the Latin American average of 1.1%. However, while potential growth has shown modest, gradual improvement in Latin America in recent years, it has shown a decreasing trend in the Caribbean. Structural weaknesses such as low productivity gains, elevated public debt levels, high rates of labour informality, and limited investment in innovation and infrastructure explain this pattern.
The Caribbean’s average labour productivity during the last three decades stagnated at less than half of OECD levels (42.5%) but above the Latin American average (36.4% of OECD levels). The region’s performance varied widely across countries compared to the OECD level. While Haiti was the least productive economy throughout the period, the most productive economies alternated between The Bahamas (1991-2007 and 2009), Trinidad and Tobago (2008 and 2010-2020), and Guyana (since 2021). Moreover, accurately measuring productivity in the Caribbean is complex, as aggregate figures can be disproportionately skewed by volatile sectors, such as commodities (OECD/IDB, 2024[6]).
Note: Potential GDP per capita growth is the growth rate the economy can sustain over the long run after controlling for population growth, excluding short-term effects linked to a difference between demand and the potential supply level. The variable denotes the growth in potential output per capita, defined as the maximum per-capita output an economy can attain without putting strain on production factors that translate into inflationary pressures. Average growth is a simple average of growth in all countries for each region, over the period analysed. Caribbean countries considered are Antigua and Barbuda, The Bahamas, Barbados, Dominica, Dominican Republic, Grenada, Haiti, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, and Trinidad and Tobago. HP=the Hodrick-Prescott filter, which was used as an alternative model due to its resilience to short-term shocks to create a smoothed curve (lambda 100); AR = autoregressive model, which uses GDP per capita growth data. The number of lags (one) was determined by analysing the autocorrelation function and choosing the model that maximised the log-likelihood.
Source: Authors’ calculations based on IMF (2025[7]), World Economic Outlook, https://www.imf.org/en/publications/weo/weo-database/2025/april.
High public debt levels remain a challenge in many Caribbean economies, constraining fiscal space
In 2024, the region’s average central government debt reached 68.6% of GDP, which represents an increase of almost four percentage points compared to 2014. Public debt stood 14.5 percentage points above the average of Latin America in 2023, at 54.1% (Figure 3). Public debt has been above 60% of GDP for a prolonged time in the Caribbean, representing serious fiscal constraints for public expenditure. The debt landscape across the region is marked by significant heterogeneity (Figure 3), with some countries having recently undergone significant fiscal consolidation.
Note: The average for Latin America excludes Venezuela and Ecuador due to data availability constraints and considers the latest available data: 2023 for Colombia and 2022 for Peru.
Source: Authors’ elaboration based on IMF-WEO (2025[8]) World Economic Outlook Database, International Monetary Fund, https://www.imf.org/en/publications/weo/weo-database/2025/april.
Trade patterns show limited diversification, with most countries relying on services and a few on commodity exports
Services trade in Caribbean countries averaged 45.7% of GDP in 2024 (Figure 4, Panel A). Eleven Caribbean countries are predominantly service exporters. In 2023, services exports surpassed 50% of GDP in Antigua and Barbuda, Grenada, Saint Lucia, and Saint Kitts and Nevis, largely due to tourism and financial services. Travel is by far the largest services trade sector in the Caribbean, making up 72% of the region’s total services trade in 2023 (Figure 4, Panel B). In contrast, merchandise corresponded to the largest share of exports relative to GDP in Trinidad and Tobago (30% of GDP), Suriname (66.8%), and Guyana (78.1%) in 2023, representing over 80% of their total exports.
Exports of goods in the Caribbean remain concentrated in primary products (38.7%) and resource-based manufactures (20.6%), which collectively accounted for nearly 60% of the region’s total goods exports in 2023. The dominant export categories are energy products, notably crude and refined petroleum. Agricultural goods, such as cereals, tobacco products, fish and processed foods (OECD/IDB, 2024[6]), tend to be exported towards other Caribbean countries.
Note: Trade refers to the sum of exports and imports of services. Panel A shows trade in services of Caribbean countries for 2024 as a percentage of GDP (World Bank, 2025). Panel B shows the services trade basket composition of Caribbean countries for 2023, with colours indicating Travel (blue), Transport (orange), and Other services (green). Other services include Construction, Insurance, Financial Services, Intellectual Property, Telecommunication, Other Businesses, Cultural Services and Government Goods and Services.
Source: Authors’ elaboration based on World Bank (2025[9]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators; UNCTAD (2025[10]), International Trade, https://unctadstat.unctad.org/datacentre/.
Despite advancements, poverty, inequality and informality remain important challenges to social inclusion
Social challenges remain pronounced. On average, approximately one-quarter of the population in the region lives below the poverty line (Figure 5). Poverty levels vary widely across countries. In Haiti and Belize, more than half of the population lives in monetary poverty, according to the latest available poverty surveys. Conversely, in Jamaica and The Bahamas, the poverty rate reached 8.2% and 12.5%, respectively. Due to data limitations, it is difficult to identify clear trends in the evolution of poverty over time, except for a few countries (World Bank, 2025[11]).
Headcounts poverty, percentages of total population
Note: The average for the Caribbean refers to the simple mean of the latest available years of reference for the whole sample of countries. The recent average for the region refers to the simple mean of the sub-sample of countries with reference years no earlier than 2016. The previous period is 2010 for Barbados, 2014 for the Dominican Republic, 2008 for Grenada, 2010 for Jamaica and 2006 for Saint Lucia. People living in poverty are defined as those living in households with income (or consumption) levels below the national poverty lines. National poverty lines are defined using country-specific methodologies. They represent the minimum amount of income or, more commonly, consumption expenditure an individual or household requires to satisfy their basic needs for a given period (usually a month) within a specific country. It is calculated using the Cost of Basic Needs approach, which explicitly incorporates both food and non-food expenditures. National poverty lines are generally positively correlated with the level of development, as basic needs shift with countries' average incomes, largely due to higher non-food expenditures. Comparing national rates in the context of highly heterogeneous stages of development, as in the Caribbean, has the advantage of showing country-specific monetary vulnerabilities of households.
Source: Authors’ elaboration based on Statistical Institute of Belize (SIB) (2018[12]), Poverty Analysis Main Findings, https://sib.org.bz/wp-content/uploads/PovertyInfographic.pdf; ECLAC (2023[13]), Social Panorama of Latin America 2023, https://repositorio.cepal.org/server/api/core/bitstreams/7ddf434a-6073-4f1e-8b71-a6639e4586d5/content; World Bank (2025[9]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators; World Bank (2025[14]), Macro Poverty Outlook: Latin America and the Caribbean, https://www.worldbank.org/en/publication/macro-poverty-outlook/mpo_lac.
Inequality is high across the Caribbean, mirroring trends in Latin America (OECD et al., 2025[15]; World Bank, 2025[11]), and exceeding levels observed in OECD Member countries. The average Gini coefficient for the Caribbean is 0.4, based on the latest available data since 2015 from seven countries (Belize, Barbados, the Dominican Republic, Grenada, Jamaica, Saint Lucia and Suriname). This is higher than the OECD (0.32) and slightly lower than the Latin American average (0.45) (ECLAC, 2023[13]).
More than six out of ten people live in households that depend solely or partially on informal work, on average. High levels of labour informality are intrinsically linked to poverty and inequality across the Caribbean. Informal employment is more than twice as prevalent among the poorest households compared to the wealthiest households in the region (Figure 6). On average, nearly half of individuals in the lowest income quintile in the Caribbean (47.1%) lived in households where all members worked informally (compared to 72.3% in Latin America). For the highest quintile, 23.6% lived in such households (20.3% in Latin America). The remainder lived in mixed households (23%), where at least one member works formally, and in completely formal households (29.8%), where all members work formally.
Note: Household types are defined according to the formality status of a household’s principal earners. If all earners are either formal or informal, the household is classified as completely formal or completely informal. If at least one earner is informal while the other is formal, the household is defined as mixed. The welfare distribution refers to the distribution of either household per capita income or consumption. The first quintile refers to the lowest income in the income distribution, while the fifth quintile refers to the highest income quintile in the income distribution.
Source: Authors’ calculations based on The Household Expenditure Survey (HES) 2013 for The Bahamas; The Trinidad and Tobago Survey of Living Conditions (TT-SLC) 2014; The Barbados Survey of Living Conditions (BSLC) 2016; The Jamaica Survey of Living Conditions (JSLC) 2019; The Suriname Survey of Living Conditions (SSLC) 2022; OECD (2024[16]), Key Indicators of Informality based on Individuals and their Households for the Dominican Republic, https://shorturl.at/IZXl5.
Total investment has grown in the last decade, but still fails to meet the required levels for development
Total investment in the Caribbean has increased over the past decade, growing from 20.5% of GDP in 2014 to 28% in 2023, above the OECD (23%) and Latin American (20.7%) averages (Figure 7). Still, investment levels, composition and sustainability remain insufficient to meet the region’s large development needs. Investment growth was largely driven by short-term or externally financed projects, including post-disaster reconstruction.2 The private sector is the main driver of investment in the Caribbean, accounting for nearly 80% of total investment, on average. This was above the Latin America average (75.7%) but below the OECD (84.2%).
Public investment is fundamental for providing the foundational infrastructure that private actors often undersupply due to limited profitability. This is particularly true in technology-intensive sectors. Public investment accounts for around 20% of total investment, on average, with Guyana reaching 54%, mainly driven by investments in the oil sector (IMF, 2025[7]). Moreover, government spending on infrastructure is low, reinforcing infrastructure gaps across the region, although limited data availability constrains a comprehensive regional assessment. During 2015‑2021, average public infrastructure investment was just above 1% of GDP, except for Belize, which invested nearly 5% of GDP (the only Caribbean country with available data exceeding the Latin American average of 2%) (Infralatam, 2021[17]).
Note: Data for each region correspond to simple averages. Investment, defined as gross capital formation, is measured by the total value of gross fixed capital formation and changes in inventories and acquisitions less disposals of valuables for a unit or sector [SNA 1993]. Investment is expressed as a ratio of total investment in the current local currency and GDP in the local currency. The Caribbean includes 14 Caribbean countries, except for Trinidad and Tobago. Latin America includes Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay.
Source: Authors’ elaboration based on IMF (2025[7]), World Economic Outlook, https://www.imf.org/en/Publications/WEO/weo-database/2024/April.
Foreign direct investment is a key source of finance for sustainable development in the Caribbean
Net inflows of foreign direct investment (FDI) in the Caribbean represented 6.3% of GDP (4.2%, excluding Guyana) in 2024, well above the Latin American average (2.5%) (Figure 8). The regional average of FDI inflows remains aligned with historical levels: 6.8% in 2023, 6.13% for 2018‑2022 and 6.15% between 2013 and 2017 (OECD/IDB, 2024[6]). FDI flows vary across countries, ranging from 1.5% of GDP in Jamaica and 3.6% in the Dominican Republic to up to 35% of GDP in Guyana, which has attracted large FDI inflows since 2017 following major oil discoveries. Preliminary figures for 2025 show similar FDI inflows of around 30% of GDP for Suriname as it follows Guyana’s footsteps, following the development of the GranMorgu offshore oil project.
FDI can help bridge investment gaps in the context of low fiscal space and constrained domestic investment in the region, thereby supporting the development of key sectors (Chapter 2). It can support digital transformation, the expansion of renewable energy, and export sophistication and diversification (OECD, 2025[18]). Moreover, FDI can generate positive spillovers in recipient economies: foreign firms often outperform domestic firms due to their access to advanced technologies, managerial expertise and greater capital intensity.
Source: Authors’ elaboration based on World Bank (2025[9]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
Greenfield FDI flows are concentrated in the services sector in most countries, and have contributed to employment creation in the region
Greenfield FDI3 is concentrated in the largest Caribbean economies. Between 2014 and 2024, total greenfield investment in the Caribbean reached USD 80 billion; 52% of this capital (USD 41.4 billion in 2024) was directed to Guyana alone, driven by investments in the oil sector. In that period, Caribbean countries, excluding Guyana, attracted USD 38.4 billion in greenfield investment. The distribution roughly mirrors the size of national economies, with the Dominican Republic accounting for USD 18 billion (46% of the total), followed by Cuba with USD 7 billion (19%) and Jamaica with USD 5 billion (12%). These three countries receive 77% of all greenfield investment entering the region (excluding investment into Guyana) (Figure 9, Panel A). This shows important contrasts across Caribbean countries – an important aspect to consider when interpreting investment data. The number of projects also varies significantly across countries, ranging from 219 in the Dominican Republic, 82 in Cuba, 80 in Jamaica and 37 in Guyana, to 6 in Antigua and Barbuda, and 4 in Dominica (Figure 9, Panel B). Greenfield FDI targeted predominantly the services sector, including accommodation and food, information and communication technology, and financial services, which attracted more than half of the investment in most countries (Figure 9, Panel C).
Companies from the European Union (EU) and the United States are the leading greenfield investors in the Caribbean. Between 2014 and 2024, the United States invested USD 48 billion, accounting for 60% of total greenfield investment in the region, driven by US companies' interest in Guyana since 2019, following Guyana's oil boom. However, when excluding Guyana, investors from the EU have led greenfield investment in the Caribbean, investing USD 14 billion and accounting for 36% of total greenfield investment in the region. They are followed by the United States (18%), Latin America and the Caribbean (LAC) countries (12%), the People’s Republic of China (8%) and the United Kingdom (6%).
Note: Greenfield FDI refers to announced greenfield FDI projects.
Source: Authors’ elaboration based on Financial Times (2024[19]), fDi Markets, https://www.fdimarkets.com/.
FDI has contributed to employment creation in the Caribbean. Announced greenfield FDI projects generated 196 021 jobs in the Caribbean in the last decade, 65% in the services sector (126 776 jobs). This was followed by manufacturing (22%, 43 284 jobs), mining (6%), construction (5%) and energy (2%) (Financial Times, 2024[19]). Within the services sector, the largest share of jobs has been generated in accommodation and food, as well as in administrative and support activities. Beyond job creation, the quality of employment is crucial for ensuring the sustainable development impact of investment. Foreign firms report paying higher average wages than domestic firms in most Caribbean economies for which data are available. In Barbados and the Dominican Republic, for example, they also offer more permanent full-time jobs, possibly reflecting their greater presence in large formal export industries such as tourism and adherence to global labour standards.
Moreover, greenfield FDI can play a particularly relevant role in advancing digital transformation, supporting manufacturing activities and promoting renewable energy in the Caribbean. Between 2014 and 2024, greenfield FDI in digital services in the region reached USD 3 billion. This accounted for a significant share of total greenfield FDI in several Caribbean countries, notably Dominica (61%), Trinidad and Tobago (53%) and Suriname (44%). Over the same period, the region attracted USD 5 billion in renewable energy projects, accounting for a significant share of FDI in Suriname (50%), Barbados (45%) and the Dominican Republic (24%). Greenfield FDI in renewable energy in LAC is positively associated with both the expansion of clean energy supply and the transformation of energy matrices in recipient countries. While services are central to most Caribbean economies, niche manufacturing has emerged in some countries to drive diversification and attract foreign investment. This includes pharmaceuticals, chemicals, and light manufacturing such as food products and textiles.
Building resilient and sustainable development is a strategic imperative for the Caribbean, a region where infrastructure gaps remain large, and vulnerability to climate hazards is high. Advancing in this direction will require large investments, not only as a defensive measure, but also for protecting livelihoods, preserving natural assets and sustaining long-term development. Aligning investments with the Caribbean’s comparative advantages and its natural capital, embedding sustainability at the core of economic transformation, is equally important.
Investing in resilient infrastructure and early warning systems will help anticipate and cushion the impacts of climate events
The region’s infrastructure is more vulnerable than in most Latin American economies, with Antigua and Barbuda, Jamaica, and Saint Vincent and the Grenadines showing the highest levels of risk, according to infrastructure vulnerability indicators. Investing in resilient infrastructure4 is a cost-effective approach to narrow infrastructure gaps, while safeguarding development gains. Delaying investment in resilience substantially increases economic and fiscal risks. Underinvestment in climate-resilient infrastructure can reduce GDP growth by nearly 1 percentage point in the first year, with cumulative losses reaching up to 15 percentage points over a decade (Mooney et al., 2025[20]).
Caribbean countries are advancing climate-resilient infrastructure across key sectors. Economies in the region are increasingly adopting a mix of engineered nature-based and integrated solutions in sectors such as coastal protection, energy and transport. As regional governments implement these targeted projects, they enhance both the long-term physical and economic resilience of their economies against intensifying climate hazards. National adaptation plans (NAPs) can play a central role in prioritising and guiding investments in resilient infrastructure across the Caribbean. Several Caribbean countries have submitted NAPs under the United Nations Framework Convention on Climate Change, including Antigua and Barbuda (2024 and 2025), Grenada (2019 and 2025), Haiti (2023), Saint Lucia (2018), Saint Vincent and the Grenadines (2019), Suriname (2020), and Trinidad and Tobago (2023 and 2024). Saint Lucia and Grenada have developed sectoral adaptation plans. Only 15 sectoral plans had been submitted globally by December 2025. For example, Saint Lucia’s Sectoral Adaptation Strategy and Action Plan identifies infrastructure as a priority and includes upgrades to roads, drainage systems, coastal defences and public buildings, guiding major investments such as the Disaster Vulnerability Reduction Project. A strong institutional environment is essential to ensure coherent, long-term and locally adapted resilience efforts.
Well-designed early warning systems (EWS) are among the most cost-effective climate adaptation measures because they reduce avoidable losses and shorten recovery times. Several Caribbean countries have been frontrunners in the development of EWS. Antigua and Barbuda, Dominica, the Dominican Republic, Saint Lucia, and Saint Vincent and the Grenadines have implemented initiatives to develop national EWS assessments and roadmaps, with support from regional and international partners.
Nonetheless, EWS progress has been uneven due to a range of factors, including high staff turnover, institutional fragmentation, and gaps in reliable communication and community preparedness programmes. To translate EWS into durable institutional strength, governments can embed them into statutory mandates that clarify roles across meteorological, water, disaster, health, transport and security agencies; and embrace integrated data governance (asset registries, hazard‑exposure databases and open standards) to enable real-time analytics.
Public-private partnerships can help catalyse new sources of private expertise and finance for critical public infrastructure
Public-private partnerships (PPPs)5 can help mobilise private expertise and finance for infrastructure; however, PPP investment in the Caribbean remains low, averaging 0.38% of GDP between 2010 and 2023, below the Latin American average of 0.54%. In 2024, PPP investment reached its highest level (1.3% of GDP), partly driven by Guyana’s PPP for the modernisation and expansion of the Port of Georgetown (Figure 10, Panel A). At the national level, from 2010 to 2024, PPP investment relative to GDP was highest in Jamaica (0.88%), followed by Saint Vincent and the Grenadines (0.63%), the Dominican Republic (0.40%), and Saint Kitts and Nevis (0.33%). Prior to 2020, the Caribbean averaged three projects per year; activity slowed during the pandemic and subsequently rebounded, with 2023 marking the highest number of projects in a single year (11 projects). Most projects were concentrated in the region’s larger economies, notably the Dominican Republic (34) and Jamaica (14) (Figure 10, Panel A). Over the same period, Latin America recorded 1 304 projects.
PPPs should adapt to the context in which they operate. Despite the many potential benefits of PPPs, there are specific conditions when costs and residual risks to governments may not be justified. For example, transferring risks to the private sector can result in higher capital costs. Key elements that create an enabling environment for PPPs in a country include well-defined regulations, sufficient institutional capacity, support for project preparation and sustainability, available financing, robust risk management and contract monitoring capacities, and performance evaluation and impact. Based on the Infrascope Index,6 the Caribbean average is below the Latin American one in all five categories of the Index, with ex-post performance evaluation and impact, and project preparation and sustainability, as the two main challenges identified in the Caribbean region (Figure 10, Panel B).
Limited project preparation capacities are a key constraint to scaling up PPPs across the region. This includes the technical, institutional, and co-ordination capabilities required to move from concept to implementation-ready projects and to mobilise financing at scale. The Project Preparation Coordination Mechanism (PPCM) established by the IDB ONE Caribbean regional programme helps address this gap by providing technical and financial support for project development, building long-term partnerships with investment and export promotion agencies at both national and regional levels, and adopting a flexible cross-sectoral approach to identify and develop a robust pipeline of high-potential projects.
Note: The World Bank’s Private Participation in Infrastructure (PPI) database records contractual arrangements for public infrastructure projects that have reached financial closure in which private parties assume operating risks by covering projects with at least a 20% private ownership stake (except for divestitures, which are included with at least a 5% stake) and may include public participation. The World Bank’s estimation of the percentage of GDP considers all kinds of projects, including those interrupted and cancelled. “Total Investment” is the sum of investment in physical assets and payments to the government; it is recorded in millions of USD. The World Bank Indicator “GDP at current USD” was used to build the ratio with the total investment’s variable. In Panel B: Score 0-100, where 100=best. For each of the five Infrascope Index categories presented, four dimensions of advancement are defined: nascent (0 to <30); emerging (30 to <60); developed 60 to <80); and mature 80 to 100. The Index covers 26 LAC countries: Argentina, The Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay, and Venezuela.
Source: Authors’ elaboration based on World Bank (2025[9]), World Development Indicators, https://datatopics.worldbank.org/world-development-indicators/; World Bank (2025[21]), Private Participation in Infrastructure (PPI): 2024 Annual Report, https://ppi.worldbank.org/en/snapshots/region/latin-america-and-the-caribbean; IDB/Economist (2025[22]), Infrascope 2023/24, https://impact.economist.com/new-globalisation/infrascope-2024/en/.
Institutional and statistical capacities are key enabling factors to attract investments and increase resilience
The capacity of Caribbean countries to attract investments and build resilience depends strongly on the effectiveness of their public institutions, with data and statistical systems playing a central and enabling role. Perceived levels of government effectiveness vary widely across Caribbean countries. Most countries perform above the LAC average, although they continue to lag behind OECD Member countries.
Well-developed national statistical systems (NSS), better data systems and real‑time analytics are essential. Caribbean countries have made progress in enhancing their statistical capacities in recent years: the region’s overall Statistical Performance Indicator score increased by 29%, from 43.1 in 2016 to 55.6 in 2022. However, this remains below the global average (68.8) and significantly below Latin America (74.4) and the OECD (89.7). Progress is also uneven across the region, with only half of Caribbean countries with available data implementing a national statistical plan in 2025 (Belize, the Dominican Republic, Grenada, Guyana, Jamaica, Saint Lucia, and Saint Vincent and the Grenadines), below the shares in Latin America (60%), the world (82%) and the OECD (97%).
A strong statistical system depends critically on human capital, as well as institutional and organisational support. Specific challenges facing NSS in the Caribbean warrant consideration. Given the small size of statistical offices and the need for staff to cover multiple functions, Caribbean NSS must prioritise key areas to maximise limited capacity. They also need to leverage regional and international collaboration to share methodologies, as well as benefit from economies of scale in data production and innovation, while mobilising sustainable investment in data and statistics. Within the National Strategy for the Development of Statistics in the Caribbean, the main priority sectors for data production and use are education, health, agriculture, economic and social development, and environment/climate change. This underscores a strong focus on human development and climate resilience.
Regional integration and international partnerships
Building an enabling environment for investment in resilience is not just a country-specific challenge, but a regional one. Regional and international co‑operation plays a key role in promoting resilient infrastructure and disaster risk management (e.g. through the Caribbean Regional Resilience Building Facility or the Caribbean Disaster Emergency Management Agency (CDEMA)).
Partnerships can also play a catalytic role in attracting quality investment and expanding the use of PPPs in the Caribbean. The financing and mobilisation efforts of development finance institutions (DFIs) can improve project financing by extending tenors, mitigating risk and increasing lender participation. They can also provide technical assistance, facilitate knowledge exchange and support multi-country project development. This can reduce transaction costs, as well as improve the quality and credibility of PPP pipelines. Examples include the Resilience and Sustainability Facility in Barbados (2022‑2025) and Jamaica (2023‑2025), under which the International Monetary Fund provides long-term financing. These initiatives support PPPs by improving fiscal credibility, strengthening institutions, and reducing climate and disaster risks. Multilateral development banks (MDBs) such as the IDB and the World Bank act as implementation partners, offering financial and technical support in areas requiring high levels of sectoral expertise. Cross-border co-operation also helps attract a broader set of investors by offering more predictable rules, larger project opportunities and strengthened risk mitigation mechanisms.
Moreover, partnerships can help strengthen institutions, particularly in building statistical capacity, which is essential in all stages of the investment cycle. Collaboration across borders enables countries to pool expertise, share methodologies, and benefit from economies of scale in data production and innovation. This is critical given the region’s small size, resource constraints and growing demand for high-quality, timely, and comparable data. Regional bodies, such as Caribbean Community (CARICOM) and the Organisation of Eastern Caribbean States (OECS), along with the United Nations Conference on Trade and Development (UNCTAD) and the Partnership in Statistics for Development in the 21st Century (PARIS21), and international organisations provide important platforms for harmonising standards and capacity building. In 2026, the IDB Compete Caribbean programme will complete a second set of enterprise surveys in the region using the World Bank Enterprise Survey methodology, while carrying out poverty assessments based on household surveys. In the past three years, PARIS21 has worked with countries such as Belize, the Dominican Republic, Grenada, Saint Lucia, and Saint Vincent and the Grenadines in strengthening statistical systems, while also providing support at the regional level. Moreover, the establishment of an inter-regional platform, the SIDS Global Data Hub, is also under discussion.
Renewed international partnerships can help Caribbean countries attract investments and harness opportunities to access vast financial resources to foster resilience. Three key strategies to do this are: continue developing innovative finance instruments, such as those pioneered through the IDB ONE Caribbean regional programme (e.g. green, social, sustainability, sustainability-linked and blue (GSSSB) bonds, thematic debt swaps, carbon-pricing tools, and pre-arranged financing mechanisms); provide greater access to global climate-related funds (e.g. the Green Climate Fund, the Adaptation Fund, the Climate Investment Fund or the Global Environment Facility); and mobilise the private sector (e.g. through the EU-LAC Global Gateway Investment Agenda (GGIA) and ONE Caribbean Project Preparation Coordination Mechanism (PPCM)). For example, several Caribbean countries have pioneered innovative financing tools, often leading in both scale and frequency compared to other SIDS in Africa, the Indian Ocean, and the Pacific. For example, in the Dominican Republic, a USD 750 million green bond marked a milestone in the region’s participation in sovereign GSSSB markets. Bilateral and multilateral partners provide technical assistance alongside financial support to scale up innovative financing mechanisms and strengthen institutional frameworks, promoting cross-country co-ordination and regional solutions. Moreover, the GGIA has allocated EUR 45 billion to finance 51 projects in LAC (39 in the Caribbean) in 5 areas: digital; climate and energy; transport; health; and education and research. The ONE Caribbean PPCM is an offer of project-structuring support for public, private and PPP projects across sectors, having assessed 30 projects and committed funding to 2 projects in its first year (2025) alone.
Sustainability is essential for the Caribbean’s development prospects
Caribbean countries face structural constraints to advancing production transformation and economic diversification, notably small markets and limited economies of scale, coupled with reduced fiscal space. In this context, investment strategies should prioritise areas of opportunity, particularly those aligned with sustainable sectors in which the region has comparative advantages. These sectors include the blue and circular economy, sustainable transport, sustainable tourism and creative industries, sustainable agriculture and food systems, energy transition, and digital transformation and artificial intelligence.
Targeted investments in these sectors could unlock their development potential while advancing sustainability, although most are at a nascent stage and current investments remain modest. Key opportunities include strengthening linkages between tourism and local economies (e.g. by supplying agricultural and fishery products, local crafts and services to cruise ships and the hospitality sector) and diversifying tourism toward new segments, including eco-tourism and attracting digital nomads. Accelerating renewable energy deployment can reduce costly external dependence and consumer energy bills by leveraging the region’s strong solar, wind and geothermal potential. Scaling up blue economy prospects could transform the management and valorisation of sargassum into an asset, expand sustainable fisheries infrastructure, or foster high-value related segments such as marine biotechnology and modernised aquaculture. Additional prospects arise from creative industries, which can generate opportunities for youth by building on the region’s vibrant cultural legacy. Sustainable transport could improve regional connectivity while reducing high transportation costs and GHG emissions, particularly from congestion in crowded urban centres. Finally, cross-cutting enablers, such as digital transformation and the circular economy, can enhance sectoral efficiency, promote sustainable business models, and reduce waste.
Domestic resource mobilisation is key to building fiscal sustainability and resilience
Tax revenues are a crucial source of development finance in the Caribbean, yet collection levels remain comparatively low, with strong cross-country heterogeneity and a persistent reliance on indirect taxes. In 2023, Caribbean countries collected an average of 20.7% of GDP in tax revenues – slightly below Latin America (21.6%) and other SIDS (21.4%), and far below the OECD average (34%) (Figure 11). The region continues to depend on indirect taxes, which account for 51% of total tax revenues – a higher share than in Latin America (44%) and the OECD (32%), although lower than in other SIDS (65%). By contrast, direct taxes – including personal income tax (PIT) and social security contributions (SSCs) – remain comparatively low. Only corporate income tax (CIT) averages slightly higher in the Caribbean (4% of GDP and 20.1% of total tax revenues) than in the OECD (3.3% of GDP and 10.2% of total tax revenues) and in other SIDS (2.8% of GDP and 14.6% of total tax revenues). However, heterogeneity across the region is substantial: CIT revenues range from 11.4% of GDP in Trinidad and Tobago to 2.0% of GDP in Antigua and Barbuda, and in some countries, they stand at 0%.
Note: The Latin America average excludes Venezuela due to data issues. Due to data quality issues, Ecuador is excluded from the Latin America average for PIT and CIT revenues. The OECD average is for 2022 and represents the unweighted average of the 38 OECD Member countries. Chile, Colombia, Costa Rica and Mexico are also part of the OECD (38). Other Small Island Developing States (SIDS) represents the simple average of Cabo Verde, Cook Islands, Fiji, Kiribati, Maldives, Mauritius, Nauru, Niue, Papua New Guinea, Samoa, Seychelles, Solomon Islands, Timor-Leste and Vanuatu.
Source: OECD et al. (2025[23]), Revenue Statistics in Latin America and the Caribbean, https://doi.org/10.1787/7594fbdd-en.
Reassessing PIT and tax expenditures, such as CIT incentives and VAT exemptions, is important to improve revenue collection in the Caribbean. Strengthening PIT performance offers scope to raise revenue and enhance progressivity, yet outcomes vary widely across countries: Jamaica, Barbados, and Trinidad and Tobago collect over 3% of GDP in PIT, while the Dominican Republic collects just 1.5%, and Antigua and Barbuda levy no PIT at all. Low PIT revenues often reflect generous tax relief, narrow bases limited to formal wage earners and high evasion. However, in many tourism-based economies, a large share of tax revenue comes from indirect taxes paid by visitors rather than residents. This means that raising PIT – which applies only to resident workers – would likely generate limited additional revenue, particularly given the prevalence of informal and low-wage employment in the sector and the very open economies.
At the same time, extensive tax expenditures significantly erode revenue bases across the region: in 2023 they represented 4.6% of GDP in the Dominican Republic and 2.9% in Jamaica in 2022; exceeded 6.5% in Suriname in 2019 and 2021; and averaged 5.8% of GDP (21% of total tax revenue) in Eastern Caribbean Currency Union countries between 2010 and 2018. CIT incentives across Caribbean countries consist mainly of long-term, generous exemptions, typically lasting 5‑15 years, with some programmes extending up to 20 years (Figure 12, Panel A). These incentives are concentrated in specific sectors, including renewable electricity (22%), tourism (15%) and manufacturing (15%) (Figure 12, Panel B). Tax expenditures – especially CIT incentives and VAT exemptions – are intended to attract investment but often deliver modest returns at high fiscal cost. Reforms that broaden the PIT base, streamline indirect tax design, and rationalise tax expenditures, combined with clear policy objectives, transparency and systematic evaluation, can strengthen revenue, efficiency, and equity in Caribbean tax systems. In addition, strengthening tax morale is equally essential. Surveys of Caribbean tax administrations indicate perceived informality, distrust, fiscal illiteracy and a lack of commitment to equity. Narrowing the trust gap between taxpayers and institutions is critical for improving voluntary compliance.
Note: The list of corporate tax incentives by country is non-exhaustive. CIT=corporate income tax. Panel B: The International Standard Industrial Classification (ISIC) of All Economic Activities, Rev. 4, was used to classify CIT incentives. Only CIT incentives with a sectoral condition are included. Within the “Other” category, Trinidad and Tobago has one incentive for activities of households as employers and undifferentiated goods- and services-producing activities of households for own use, and one for financial and insurance activities; the Dominican Republic has one incentive for waste management. The “Scientific research and development” category includes a single sector-specific incentive from Barbados, which applies only to R&D expenditures in specific industries, such as medical sciences, engineering and technology, natural sciences and financial technology. R&D incentives are granted by other countries but are economy-wide and therefore not included in this sector-specific grouping.
Source: Authors’ elaboration based on (PwC, 2025[24]; Gascon et al., forthcoming[25]).
International tax co-operation is becoming a key pillar of domestic resource mobilisation in the Caribbean. Countries are advancing in the adoption of international tax transparency standards and expanding participation in the OECD/G20 Inclusive Framework. The global minimum tax (GMT) creates opportunities to curb harmful tax competition; The Bahamas, Barbados and Curaçao have already adopted GMT rules. Progress is also visible in transfer pricing, with six jurisdictions introducing regulations focused on priority sectors such as agriculture, tourism, finance and extractives. Despite these advances, enforcement capacity remains a central challenge.
Non-tax revenues play an important but uneven role across the Caribbean, reflecting diverse economic structures. In 2023, they averaged 3.6% of GDP, ranging from less than 1% in Barbados and Belize to over 6.5% in Trinidad and Tobago, and 11.6% in Cuba. Some service-based economies rely heavily on the sale of public services and citizenship-by-investment (CBI) programmes, which in Dominica and Saint Kitts and Nevis generated up to 33% and 53% of GDP before and during the pandemic, respectively. CBI arrangements have financed climate-resilient infrastructure and strengthened fiscal positions in several countries. However, they also expose governments to abrupt revenue declines when applications fall, as well as heightened risks related to money laundering, due diligence and transparency. In contrast, resource-rich economies such as Guyana and Trinidad and Tobago depend primarily on rents and royalties, which accounted for 96% and 76% of non-tax revenues in 2023, respectively.
Robust fiscal frameworks are crucial for managing high-debt levels and protecting fiscal space in the region. Public debt averaged 68.6% of GDP in 2024, following a sharp rise during the pandemic, with debt service absorbing 15.8% of tax revenues in 2023. Many countries remain highly vulnerable: external debt represents about half of total debt, more than 60% in some cases, and foreign-currency exposure amplifies risks in the face of exchange-rate shocks. External debt service pressures have been severe, reaching 19% of government revenues in 2021 and peaking at 33% of exports in Jamaica and 25% in Dominica when tourism collapsed. While fiscal rules and reforms have helped countries like Jamaica, Grenada and Barbados reduce debt, other countries continue to face refinancing risks and rising costs. Credible fiscal rules, medium-term expenditure and debt strategies, independent fiscal councils and sovereign wealth funds can support sustainability. However, high exposure to natural disasters in the Caribbean makes shock-responsive frameworks indispensable.
Private capital can be a fundamental source of development financing
Deepening capital markets through regional integration is crucial for unlocking long-term financing in the Caribbean. Capital markets, encompassing equity and debt markets, provide governments and firms with access to long-term funds that support investment, innovation and economic growth. Despite an average market capitalisation of 48.4% of GDP, higher than Latin America’s 33.2% but below the OECD’s 66.4%, Caribbean capital markets remain shallow, illiquid and concentrated (Figure 13, Panel A). Stock turnover remains at just 1.2% compared to 31.6% in Latin America (Figure 13, Panel B). Bond markets are similarly underdeveloped, dominated by government securities and offering limited corporate issuance.
Regional financial integration could address these limitations by broadening the investor and issuer base, lowering transaction costs, enhancing liquidity and promoting cross-country investment. Existing platforms such as the Eastern Caribbean Regional Government Securities Market and cross-listing arrangements among Barbados, the Eastern Caribbean, Jamaica, and Trinidad and Tobago demonstrate the potential of integration. However, further development is needed to create a robust, liquid and inclusive regional capital market that can support long-term development priorities.
Note: Data correspond to 2024 for Jamaica, Latin America and the OECD, and to 2020 for the remaining Caribbean countries.
Source: Authors’ elaboration based on Beuermann et al. (2024[26]), Are We There Yet? The Path Towards Sustained Economic Growth in the Caribbean, https://doi.org/10.18235/0013218; World Bank (2024[27]), World Development Indicators, https://data.worldbank.org/.
Official development assistance (ODA) and remittances remain key external financing sources for Caribbean economies, although their scale and impact vary. Between 2000 and 2023, ODA averaged 2.53% of gross national income, significantly above the Latin American average of 1.54%. Flows spiked during crises such as natural disasters and the COVID-19 pandemic. Remittances, by contrast, have grown steadily to 5.4% of GDP in 2024, exceeding ODA. They provide a countercyclical buffer that helps stabilise household consumption, strengthen external reserves and support domestic demand. In many cases remittances are equivalent to between 10-20% of GDP. Despite their scale, remittances are primarily used for consumption rather than productive investment. Although they may not directly contribute to contemporaneous capital accumulation, household spending on food, childcare, and education can significantly support human capital accumulation in the region and globally, while also contributing to poverty reduction through investments in human capital. Of greater concern for long-term growth and technological development is how to contain the “brain drain”, as most Caribbean countries continue to experience high rates of emigration among professional and skilled labour.
Co‑operation across multilateral, regional and national development banks and development co‑operation agencies is key to expanding access to finance
Development finance institutions (DFIs) are central to expanding access to finance in the Caribbean, particularly for small and medium-sized enterprises, infrastructure and climate-resilient projects. National DFIs in some countries, such as the Development Bank of Jamaica (DBJ), National Export Import Bank (EXIMBANK) of Trinidad and Tobago, and the Saint Lucia Development Bank (SLDB), help address financing gaps through concessional loans, credit guarantees, and technical assistance. To that end, they target underfunded sectors, including agriculture, renewable energy and tourism.
While these institutions play a vital role in supporting private-sector growth and enabling long-term development, many face constraints related to capitalisation, risk appetite and technical capacity. These restraints limit their ability to scale investments or respond effectively to climate-related shocks. Some Caribbean countries lack national DFIs altogether; in both cases, regional development banks (RDBs), multilateral development banks (MDBs), and development co‑operation agencies are essential for complementing domestic institutions, sharing knowledge, building sector-specific project pipelines, and helping mobilise finance to strengthen sustainable development outcomes.
RDBs and MDBs such as the Caribbean Development Bank (CDB), the IDB Group, the Development Bank of Latin America and the Caribbean (CAF), the World Bank Group, and the European Investment Bank (EIB) combine financing with technical expertise to support complex sustainable development and climate projects. Initiatives include the joint MDB Caribbean Multi-Guarantor Debt for Resilience Initiative and the Sustainable Energy Facility for the Eastern Caribbean financed by the IDB through the CDB. These illustrate how blended finance, guarantees, and risk-sharing mechanisms can expand lending capacity, attract private capital and create fiscal space for resilient infrastructure and regional public goods. Similarly, partnerships with development co-operation agencies like the French Development Agency (AFD) can help enhance operational efficiency, integrate environment, social and governance (ESG) safeguards, and strengthen national DFIs. This ensures that Caribbean countries can access long-term financing, while advancing inclusive and climate-resilient development.
Innovative debt financing mechanisms can mobilise resources to support environmental, social and climate resilience objectives
Innovative debt financing mechanisms are transforming the Caribbean’s ability to mobilise resources for environmental, social and climate resilience objectives. Some instruments raise funds through debt markets and channel capital towards specific goals, such as GSSSB bonds, as well as thematic debt swaps and carbon-pricing tools. An increasing set of instruments focus on boosting resilience to natural disasters, a priority for the Caribbean. They do this through pre-arranged financing mechanisms such as regional risk pools, catastrophe (CAT) bonds, contingent disaster loans and grants, and climate resilient debt clauses (CRDCs). Countries like the Dominican Republic, Belize, Barbados, and Jamaica have pioneered these mechanisms, demonstrating leadership in sovereign and corporate GSSSB bond issuance, debt-for-nature swaps and CRDCs.
Thematic bonds offer significant potential in the Caribbean, but their expansion is constrained by limited institutional capacity, small issuance sizes and low market liquidity. Between 2019 and 2024, the international GSSSB bond market in the Caribbean reached a cumulative value of USD 2 billion (Figure 14, Panel A). Green bonds lead the way with US 804 million, followed by blue bonds at USD 385 million, sustainability bonds at USD 364 million and sustainability-linked bonds at USD 300 million. Corporate and sovereign issuers account for 40% of total issuances, and quasi‑sovereigns for 20% (Figure 14, Panel B). Enhancing flexibility, strengthening regulatory and institutional frameworks, and improving project preparation are essential to attract investors and scale up thematic bond issuance. MDBs and development partners play a critical role by supporting project pipelines, providing technical assistance and promoting regional co‑ordination to overcome these barriers.
Note: Sustainability label bonds include a USD 364 million debt‑for‑nature conversion by Belize. SLBs include a USD 73 million sustainability-linked bond issued by BB Blue DAC to advance a loan to the Barbados government as part of a debt‑for‑nature swap.
Source: Authors’ elaboration based on OECD/IDB (2024[6]) , Caribbean Development Dynamics 2025, https://doi.org/10.1787/a8e79405-en.
Thematic debt conversions are becoming an important tool for Caribbean countries to reduce debt and finance climate and environmental goals, although institutional and co‑ordination challenges persist. These mechanisms allow governments to repurchase external debt at a discount and redirect the savings towards conservation or climate-related investments. Over USD 450 million has been unlocked for nature and marine conservation through debt conversions in Belize, Barbados, and The Bahamas, illustrating the growing prominence and innovative structuring. Thematic debt conversions may affect sovereign credit ratings, as rating agencies differ in whether they classify such operations as distressed exchanges. Scaling up these operations depends on institutional capacity, regulatory quality, transaction size and interest-rate differentials between old and new debt, and the ability of governments, creditors, and conservation actors to co‑ordinate effectively. This is an area where development co‑operation agencies and MDBs play a pivotal role by providing guarantees, reducing issuance costs and supporting regional platforms.
Carbon credit markets are emerging as an important source of climate finance and foreign investment for Caribbean countries, but growth depends on overcoming regulatory, technical, and institutional challenges. Global carbon markets mobilised over USD 100 billion in 2024, covering 28% of global emissions, with countries such as Brazil, Colombia, Guyana and Peru already active in both voluntary and compliance markets. Several Caribbean states are following suit: Jamaica is developing a domestic market, Guyana leads in Reducing Emissions from Deforestation and Forest Degradation Plus (REDD+) credits, and Grenada and Saint Lucia are building readiness with external support. The Bahamas launched the world’s first blue-carbon sovereign transaction, with the objective of measuring carbon absorbed by seagrasses and converting verified removals into tradable carbon securities for global markets (Laconic Global, 2025[28]). Scaling these opportunities requires strong regulatory and verification systems to ensure environmental integrity, prevent double counting, and clarify ownership – areas where capacity remains limited. Regional initiatives, such as the OECS‑GIZ Global Carbon Market project, aim to strengthen institutions, build robust frameworks and foster a Caribbean Alliance on Carbon Markets and Climate Finance.
Enhanced regulation and oversight are important for the credibility of sustainable finance instruments in the Caribbean. Robust frameworks – including taxonomies, standards, guidelines, and policies – integrate ESG principles into financial operations while boosting transparency and investor confidence. While the Dominican Republic has launched the region’s first green taxonomy, other countries are advancing initiatives such as the Green Bond Plus platform in Jamaica and the Eastern Caribbean Currency Union’s pilot programme. Regional collaboration, technical assistance and a common green finance taxonomy are essential to strengthen co‑ordination, mitigate risks and foster innovation across Caribbean markets.
Caribbean countries are also shifting from reactive post-disaster responses to pre-arranged financing mechanisms. This transition has driven the increased use of instruments such as regional risk pools, CAT bonds, contingent loans and grants, and CRDCs to strengthen disaster resilience. Similar advances in other regions, including in Emerging Asian countries, indicate the benefits of multi-layered disaster risk financing frameworks that combine pre-arranged financing instruments and traditional budgetary tools (OECD, 2025[29]).
Regional risk pools are a cornerstone of Caribbean resilience. The Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company (CCRIF SPC) is a non-profit insurance entity that pools the risks of participating countries into a single, better-diversified mechanism. Since its inception in 2007, CCRIF SPC has made 81 payouts totalling USD 462 million to member governments across 19 Caribbean countries and four Central American countries7 (CCRIF SPC, 2026[30]). International experience, including that of the Association of Southeast Asian Nations (ASEAN), shows that regional disaster risk-sharing arrangements can deliver significant diversification and resilience benefits, as carefully selected country groupings with weakly correlated loss profiles can form effective multi-country catastrophe risk-sharing pools (OECD, 2025[29]). However, challenges remain: coverage limits can leave countries partially exposed during large disasters; payouts do not always match actual losses; and premiums are rising. Strengthening risk modelling and expanding product offerings are essential to maintain its effectiveness.
CAT bonds are another important but underused instrument, providing fast, rules-based payouts when disaster parameters are triggered. An example of this is the World Bank CAT bond payout of USD 150 million to Jamaica after Hurricane Melissa in 2025. High structuring costs, technical demands and small scale, however, limit wider adoption of CAT bonds. This highlights the need for stronger technical support and regional approaches to reduce basis risk.
Contingent disaster-response loans are another pre-arranged financing mechanism in the Caribbean, offering quick post-shock funding. These instruments, such as the IDB’s Contingent Credit Facility (CCF), provide immediate liquidity following natural disasters or public health emergencies, with parametric coverage up to USD 300 million (2% of GDP) and non-parametric coverage up to USD 100 million (1% of GDP). In 2025, the IDB’s CCF made available USD 300 million to Jamaica following Hurricane Melissa (IDB, 2025[31]). The current CCF portfolio in the Caribbean also includes coverage for The Bahamas, Barbados, Belize, the Dominican Republic, and Suriname, delivering predictable funding without adding debt unless triggered.
CRDCs can help smooth liquidity after disasters, but adoption in the Caribbean remains modest due to limited creditor participation and technical complexity. In 2024, in a world first, Grenada was able to pause debt repayment due to a hurricane debt suspension clause after Hurricane Beryl, saving the country USD 28 million. Barbados pioneered CRDCs in its USD 700 million debt restructuring and later embedded them in its blue bond, allowing payment pauses of up to two years after a major event. Still, uneven uptake by private creditors and uncertainty about rating implications hinder broader use. Greater co‑ordination among official and commercial creditors is needed to scale CRDCs across the region.
Coherent frameworks are essential for maximising the effectiveness of pre-arranged disaster finance instruments in the Caribbean. By integrating disaster risk financing into broader fiscal policy and public investment systems, countries can ensure that instruments complement each other, align with debt management strategies and support efficient resource allocation. The OECD’s framework for strengthening financial management of climate-related risks emphasises the importance of reporting climate-related risks and their fiscal implications, mitigating financial losses through risk reduction, adaptation, insurance, and clear compensation arrangements, and preparing integrated financial strategies that combine budgetary tools, debt financing, and risk transfer instruments (OECD, 2022[32]).
Risk-layering approaches – combining reserve funds, risk retention instruments, and risk transfer tools such as CAT bonds and insurance – match financing strategies to the probability and severity of potential disasters. Since each financing mechanism has distinct advantages and limitations, a national disaster risk financing strategy should combine different instruments in a co-ordinated way. Governments can do this by matching instruments to the type of risk they face: reserve funds for more frequent but lower-impact events; risk-retention instruments for events that occur regularly and have moderate impacts; and risk-transfer instruments for rare but severe disasters (Figure 15). Such frameworks should also consider country-specific needs, fiscal and market contexts, and interactions with social protection and thematic investment instruments. Innovation in early-action financing, which quickly deploys resources when an event becomes imminent, highlights the need for operational readiness and collaboration with international partners to enhance resilience and cost effectiveness. Jamaica has developed such a framework, which allowed it to mobilise funds for reconstruction very quickly – within two to three months of the onset of Hurricane Melissa, a Category 5 storm. It also strengthened resilience in the aftermath of the human tragedy.
Source: Based on IDB disaster risk finance team and Mustapha and Benson (2024[33]), Demystifying Pre‑arranged Financing for Governments: A Stocktake of Financial Instruments from International Financial Institutions, https://www.disasterprotection.org/publications-centre/demystifying-pre-arranged-financing-for-governments.
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← 1. Depending on data availability, the report focuses its analysis on 16 Caribbean countries: Antigua and Barbuda, Barbados, The Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago. These 16 countries are part of the 39 SIDS. The report analyses them alongside the Latin America and OECD averages. When relevant, the analysis also incorporates the perspective of the “Greater Caribbean”, including other countries and territories in the Caribbean basin.
← 2. These cross-regional comparisons must be interpreted with caution. Given the Caribbean’s relatively small economies, headline investment-to-GDP ratios may overstate the region’s actual investment capacity and obscure the significant gaps that remain in meeting infrastructure and development needs.
← 3. Among the different forms of FDI, greenfield investment refers to the establishment of new facilities or the expansion of existing operations by foreign investors and is typically associated with capital formation and job creation.
← 4. Resilient infrastructure refers to new or existing assets that are planned, designed, constructed, operated or retrofitted to anticipate, withstand, and adapt to the impacts of a changing climate.
← 5. PPPs are generally understood as long-term contractual arrangements between a government entity and a private partner for the provision of a public asset or service. In the Caribbean, PPPs can support more efficient infrastructure delivery, diversify funding sources, including through user-pay mechanisms, and broaden access to global debt and equity markets.
← 6. The Infrascope Index (https://infrascope.eiu.com/about) is a benchmarking tool that evaluates the capacity of countries to identify, select, prepare, structure and execute PPP projects. This helps determine a country’s capacity to implement sustainable and efficient PPPs in key sectors, including transport, energy, water and sanitation, solid waste management, and social infrastructure. The Index aims to help policymakers identify the challenges to private sector participation in infrastructure that, if overcome, could encourage greater use and availability of PPPs and support the broader development agenda.
← 7. The Facility includes 19 Caribbean members – Anguilla, Antigua and Barbuda, Barbados, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, Dominica, Grenada, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, Sint Maarten, St. Vincent and the Grenadines, The Bahamas, Trinidad and Tobago, and the Turks and Caicos Islands – as well as four Central American countries: Guatemala, Honduras, Nicaragua, and Panama.