July 12, Colombo: 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 Finance and Planning Ministry said.
The World Bank has agreed to provide US$ 102 million (Rs.13.26 billion) 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 programme, we are eligible for this financing product. It has three year drawdown period may be renewed up to four times for a maximum of 15 years.
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 floods, 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 major shocks for public finances and debt sustainability of the country while expanding 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 government’s ability to gather resources from standard tax collections.
Therefore the World Bank 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 Ministry said in a statement.
The Government has also decided to obtain a credit of US$ 110 million (Rs. 14.3 billion) on concessional terms from the World Bank to implement the Climate Resilience Improvement Project (CRIP).
The loan will finance the project to reduce the vulnerability of exposed people and assets to climate risk and to improve Government's capacity to effectively respond to disasters.
The Government of Sri Lanka 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 Ministry said.
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.
The Financing Agreements on the two programs were signed on Thursday by Secretary, Ministry of Finance and Planning Dr. P.B. Jayasundera and World Bank Country Director for Sri Lanka and Maldives Ms. Francoise Clottes.