Rich in reserves, poor in protection: the most expensive way to carry risk

An analysis challenges the International Monetary Fund's (IMF) assessment that Dutch Caribbean islands' foreign reserves are adequate for all purposes. The author contends that while these reserves are sufficient to defend currency pegs, they are not intended to cover disaster costs. Relying on foreign reserves for post-disaster funding, or on the Netherlands as a backstop, is described as the most expensive method of managing such risks. The analysis indicates varying reserve levels among Caribbean central banks, with Barbados significantly exceeding the IMF's adequacy metric, Aruba and the Bahamas at or slightly above it, and Curaçao and Sint Maarten falling below.