Sri Lanka first in South Asia to get innovative natural disaster financing from WB
Monday, 14 July 2014 02:52
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World Bank agrees to provide $ 102 m development policy loan to Sri Lanka with a Catastrophe Differed Drawdown Option (CATDDO) credit line that can be drawn on partially or in full if a country declares a state of disaster after a natural disaster
Sri Lanka has become the First South Asian Country to access an innovative form of World Bank financing that gives immediate access to funds after a natural disaster.
The World Bank has agreed to provide $ 102 million (Rs. 13,260 m) development policy loan (DPL) to the Government of Sri Lanka with a Catastrophe Differed Drawdown Option (CATDDO), which is a line of credit that can be drawn on partially or in full if a country declares a state of disaster after a natural disaster.
This financing has revolving feature, which means that amounts repaid during drawdown period are available for subsequent withdrawal. Since Sri Lanka has a disaster risk management program, it is eligible for this financing product. It has three-year drawdown period may be renewed up to four times for a maximum of 15 years.
The world is facing an increasing frequency and intensity of natural disasters that have had devastating impacts. Being a country vulnerable for multi hazards, Sri Lanka had faced an increased occurrence of natural catastrophes specially the hydrometeorology events over the past two decades. These include such as flood, landslides, high winds, cyclones, tsunami, etc.
People live in disaster prone areas are usually the first to suffer in natural disaster and they usually do not have adequate resource to cope with the losses of income and property. In addition to the direct costs, usually measured in terms of damages, fatalities, casualties and output losses, these disasters have the potential to constitute a major shocks for public finances and debt sustainability of the country while expanding our fiscal deficits and creating substantially high economic and social burden for the Government.
The reconstruction and rehabilitation activities after a disaster require increases in Government expenditures and the contraction in economic activity may reduce the Government’s ability to gather resources from standard tax collections.
Therefore this Development Policy Loan will help the Government to raise funds immediately after a natural disaster to avoid the negative impact of the fiscal stance.
The Government has also decided to obtain a credit of $ 110 million (Rs. 14, 300 m) on concessional terms from the World Bank to implement the Climate Resilience Improvement Project (CRIP), which will finance to reduce the vulnerability of exposed people and assets to climate risk and to improve Government’s capacity to respond effectively to disasters.
The Government has been taking significant steps towards strengthening the public mechanism in order to manage disasters while investing heavily on emergency preparedness and responsive capacity as priority is given to include climate change impacts in the country’s development agenda.
The resilience that the Government would see through the implementation of this project would be first to identify investment gaps, and then to identify the ways of investments to be linked to disaster risk management to ensure the continued and sustainable economic growth. The project will also improve physical resilience to hydro metrological events through mitigation investments in disaster and climate resilient infrastructure.
Followed by the above scope, the project will be focusing on long term capital-development planning. This involves a detailed modelling of flood and drought risk in nine major river basins including major river basins such as Mahaweli and Kelani Ganga. The purpose of the modelling is to carry out comprehensive flood and drought scenarios and assessing the underlying causes of flood and drought including rainfall variability and land use changes.
The analytical work under this will serve as a basis for future climate resilience investments and will help the Government to understand the risk and adopt the required risk mitigation measures. Accordingly, the resulting flood and drought maps can be used to establish appropriate water and land use policies, quantify the expected losses due to drought or floods and to find ways to improve the strategic development and investment plans. At the end of this exercise, more than Rs 13 billion investments opportunities will be identified.
The project would also next address the urgent rehabilitation of hydrological infrastructures to increase the resilience to climate risks. More precisely this would hardwire resilience to climate-related hazards into the infrastructure of the country that further drive the development without a burden to the Government in an event of a hazard.
Under this, about 716 km length of distribution canals, 399 km length of flood bunds, and 109 km length of link-roads will be improved, while 778 distribution structures along canals will be improved and more than 100 of culverts and bridges are to be rehabilitated. More prominently, slope-stability reinforcing will be carried out in 18 landslide prone schools premises protecting 30,000 students from possible landslide hazards.
After the implementation, a total of 450,000 people will be directly benefited and approximately 11.5 million people will be indirectly benefited all over the country.
The Financing Agreements on the aforesaid two programs were signed by Ministry of Finance and Planning Secretary Dr. P.B. Jayasundera on behalf of the Government and World Bank Country Director for Sri Lanka and Maldives Francoise Clottes on behalf of the World Bank.
