ArmInfo.The Eurasian Fund for Stabilization and Development (EFSD) has prepared a new working paper "Assessing the potential impact of natural disasters on debt sustainability of Armenia, Kyrgyzstan and Tajikistan." Due to their geographical location, relatively small territory and highly concentrated economy, natural disaster risks can have a significant impact on the macroeconomic indicators of these countries.
According to the EFSD press service, as part of the study, country profiles were compiled, including systematized information on geography, climate, demography and economics, as well as a compilation and analysis of data on past natural disasters. Based on the analysis of historical data, it was concluded that the main threat from possible natural disasters for the economic sustainability of Armenia is earthquakes and droughts, for Kyrgyzstan and Tajikistan - earthquakes and floods.
EFSD experts have developed an action algorithm that can be used to assess the impact of natural disasters on macroeconomic parameters and the debt sustainability of the state. This algorithm includes several stages: (1) selection of the analyzed type of natural disaster, (2) assessment of the amount of direct economic damage from a natural disaster, (3) assessment of the impact of this damage on various macroeconomic indicators using general equilibrium models (QPM model), ( 4) implementation of stress testing within the framework of the debt sustainability analysis (DSA) system in order to identify risks to the solvency of the state.
"The presented approach and assessments can be used to develop fiscal strategies, as well as strategies for counteracting natural disasters and adapting to their consequences. This, in turn, will contribute to more effective management of financial risks and ensuring the stability of economic development," noted the Deputy Executive Director - Chief Economist of the EFSD Sergei Ulatov.
The full version of the working paper "Assessing the potential impact of natural disasters on the debt sustainability of Armenia, Kyrgyzstan and Tajikistan" can be found on the EFSD website.
The Eurasian Fund for Stabilization and Development (EFSD) is a regional financial mechanism with a volume of more than US$9 billion, which was established in 2009 by the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation and the Republic of Tajikistan. The Fund was created in order to overcome the negative consequences of the crisis, ensure long-term sustainability and promote the integration of the economies of the Fund's member states.
