Why Disasters Leave Countries Deeper in Debt
CEE Distinguished Professor Auroop Ganguly and Aayushi Mishra, PhD ’28, civil and environmental engineering, analyzed how severe disasters trap vulnerable nations in a “climate-debt doom loop” and proposed financial policy reforms to help countries invest in long-term resilience.
This article originally appeared on Northeastern Global News. It was published by Katya Poltorak. Main photo: Hurricane Melissa left Jamaica paying for past damage while trying to protect itself from future storms. AP Photo/Matias Delacroix
When disaster recovery means deeper debt and weaker defenses. How to escape the ‘climate-debt doom loop’
When a hurricane cost Jamaica $12.2 billion in losses, insurance payouts were a drop in the bucket and debt pressures sapped storm defenses. Northeastern researchers offer ways out of the cycle of borrowing to rebuild.
It took around 480,000 trucks to haul away 4.8 million metric tons of rubble across western Jamaica after hurricane Melissa tore through the Caribbean in 2025, United Nations satellites showed.
The strongest hurricane on record in Jamaica, the Category 5 storm flooded plantain farms, blew the roofs off 120,000 homes and knocked out power across much of the island. The Planning Institute of Jamaica put the cost of damage and losses at up to $12.2 billion — 56.7% of the country’s 2024 gross domestic product, or GDP. But disaster insurance and catastrophe bond payouts covered only around 2%, according to a recent Science analysis by Northeastern civil and environmental engineering professor Auroop R. Ganguly, Northeastern College of Engineering graduate student Aayushi Mishra and their colleagues.
Jamaica became a poster child for financial responsibility after spending a decade digging its way out of debt, but the reputation meant nothing when the storm left it in desperate need of more funds — and a brand-new mountain of loans to repay, the analysis found.
Countries along the Atlantic coast from the Caribbean to the Middle Americas are facing the same problem. So are parts of Asia.
“It could be wildfires, could be floods, could be any kind of impact that would need debt for its recovery,” Mishra said. Even earthquakes or cyberattacks count, since they have similar implications for infrastructure, Ganguly said.
The researchers suggest a four-pronged solution for escaping from this vicious cycle, known as the climate debt doom loop. It calls for tweaking current financing, repayment and insurance policies to allow countries to invest in their own resilience.
Ultimately, “the point isn’t to just keep getting bigger and bigger insurance coverage,” Mishra said. “It’s to rethink the system that keeps countries trapped.”
Just over a month before Melissa struck, the credit rating company Standard and Poor’s upgraded Jamaica’s rating, recognizing the years it kept spending in check while consistently chipping away at its debt bills.
“They cut their debt down in half in just 10 years, which is unheard of,” Mishra said.
Read full story at Northeastern Global News