and 100 percent of GDP. Scientific research into the impact of global warming on tropical cyclones indicates that there is likely to be an increase in high intensity cyclones, which cause the most damage, during the course of the 21<sup>st</sup> century, although by how much they will increase is uncertain. Some SIDS are also highly exposed to sea level rise and several SIDS, mainly, but not only, in Oceania are projected to incur the loss of a substantial part of their land area to inundation by sea water during the course of this century.

The main fiscal impact of substantial tropical cyclone disasters (which cause large losses in relation to GDP) during the 2010s was a very steep increase in government expenditure, mainly to fund recovery, repair and rebuilding of damaged assets. This was often accompanied by increased grant inflows, which mitigated the adverse impact on public borrowing, although in some cases, there were larger fiscal deficits and higher public borrowing. In some countries, non-disaster related government expenditures were suppressed following disasters to free up budget resources for disaster related expenditures, which obviously could create longer term fiscal pressures.

Because of their vulnerabilities to climate induced disasters, SIDS need to invest in adaptation, and particularly, in strengthening public infrastructure, to make it more resilient to natural disasters, building specific infrastructure, such as fortifying coastal defense systems, to protect their populations and economic assets from damage as well as social and economic resilience to climate change. How much this will cost depends on the specific vulnerabilities and exposure of each SIDS. For some SIDS with disaster resilience strategies, the estimated annual costs of implementing comprehensive adaptation strategies are very high as a share of their GDP. There are likely to be high returns to investing in enhancing the understanding of the specific risks facing individual capital assets so that the technical and engineering design of adaptation investments can be tailored to these risks. The first step in strengthening resilience of SIDS to climate change should be the preparation of rigorous and carefully-costed adaptation strategies, based on a comprehensive analysis of the risks to which they are exposed, and the potential costs if these risks materialize. The governments of Grenada and Dominica have already prepared Disaster Resilience Strategies which set out long term programs of capital investments for adaptation alongside other measures such as accumulating insurance funds; these are examples which other SIDS should consider implementing.

The public debt burden of SIDS is heterogeneous but, with two exceptions, Antigua and Barbuda and Suriname, is not assessed as being unsustainable in the most recent DSA undertaken by the IMF/World Bank. Two other SIDS are assessed as being in debt distress, but this is for legal and technical reasons rather than lack of fiscal resources—because they have unresolved bilateral arrears.

More than a third of SIDS which are independent UN member states have relatively high public debt ratios. Seven SIDS for which PV data are available in the DSAs breached the applicable threshold or benchmark for the PV of PPG debt to GDP in 2022, although only two of these countries also breached the threshold for external PPG debt to GDP. Fourteen SIDS were assessed in the DSAs as being at high risk of sovereign debt distress and three more are assessed as having substantial, elevated or significant risks. Although high levels of public debt which are projected to be above the applicable thresholds for prolonged periods is a major source of risk for three of the SIDS at high risk of debt distress, a more common reason is their 27