The Philippines is the first country in the Asia-Pacific region to secure a US$500 million loan from the World Bank to strengthen its disaster risk reduction and investment planning as well as help manage the financial impact when disasters strike.
Finance Secretary Cesar Purisima says the policy loan would give the Philippines the flexibility to use the funds as needed. The fund would be drawn in three years and renewable up to four times within 15 years.
Secretary Purisima noted that the Philippines is among the most vulnerable countries in the world. Together, the 20 most vulnerable countries face escalating losses of US$44.9 billion due to climate-related natural disasters alone. Inaction is set to cost us even more.
“With the number set to multiply almost ten-fold by 2030, amounting to $418 billion, we turn to innovative financing mechanisms to boost our resilience,” says Purisima.
On average, more than 1,000 lives are lost every year in the Philippines, with typhoons accounting for 74 percent of the fatalities, 62 percent of the total damages, and 70 percent of agricultural damages. Also, the country is highly exposed to geologic hazards including earthquakes and volcanic eruptions.
In 2013, Typhoon Yolanda (Haiyan) devastated the country causing over 6,000 fatalities and thousands more missing, and creating extensive damage to properties, infrastructure, businesses, and livelihoods.
Total damage and losses reached US$12.9 billion (P571.1 billion), cutting economic growth by about 0.9 % in 2013, and another 0.3 % in 2014. As a result, about 2.3 million people fell below the poverty line.
“Financial shocks caused by natural disasters undermine economic growth and poverty reduction. This is the environmental equivalent of the middle income trap. Governments need to be agile in mobilizing resources if we are to break free from disaster-traps that knock back the poorest and most vulnerable,” says Purisima.
The Department of Finance (DOF) developed the Disaster Risk Financing and Insurance Strategy in 2015 to ensure financial resilience at the national, local, and individual levels.
At the national level, the government will combine different financial instruments to protect the country against major events, including reserves such as the national and local disaster risk reduction fund, and contingent credit granted by the World Bank.
At the local and individual levels, the DOF is working with the World Bank to set up a sub-national insurance pool to provide local government units with immediate liquidity following disasters and design a property catastrophe risk insurance pool for homeowners and businesses.
The DOF is also collaborating with Department of Social Welfare and Development to set up a system of emergency income support through post-disaster cash transfers utilizing the payment infrastructure of Pantawid Pamilya, the country’s conditional cash transfer program. This will help strengthen post-disaster assistance to the poorest and most vulnerable.
World Bank Philippine country director Motoo Konishi says this new policy loan signifies the World Bank’s recognition of the Philippines’ comprehensive efforts to strengthen the country’s capacity for managing disaster risks.
Following Tropical Storm Ondoy (Ketsana) and Typhoon Pepeng (Parma) in 2009, legislators passed Republic Act 10121 or the Philippine Disaster Risk Reduction and Management (DRRM) Act mandating a shift from disaster response to disaster risk reduction and preparedness.