WASHINGTON DC, SEPTEMBER 28, 2011—The World Bank and the Philippine Government signed on Saturday (September 23) a new financing agreement in support of the country’s program for improving preparedness against natural disasters and reducing the vulnerability of Filipinos to the impact of these adverse events.
Signed at the World Bank headquarters at the sidelines of the Annual Meetings of the World Bank and International Monetary Fund (IMF), this new financing agreement provides a US$500 million contingent line of credit— an instrument called the Disaster Risk Management Development Policy Loan with Catastrophe Deferred Drawdown Option (CAT-DDO)—that the government can immediately tap for emergency relief, recovery, and reconstruction following a major natural disaster.
Finance Secretary Cesar Purisima, who signed for the Philippine government, said that as a quick source of financing, CAT-DDO provides the country with a bridge financing while other sources like bilateral aid and concessional funding are being mobilized following a major natural disaster.
This facility, he said, is very critical given that the Philippines is among the most vulnerable countries in the world to natural disasters.
“When disaster strikes, we are often confronted with the urgent need to provide emergency assistance to victims and to rebuild roads, hospitals, schools, irrigation systems, electric power and water supply, and other important infrastructure,” said Secretary Purisima. “CAT-DDO provides us with resources to finance immediate relief, recovery and reconstruction, thus lessening social and economic dislocation in affected communities, especially on the poor who are the most vulnerable.”
“It will also help reduce the country’s fiscal vulnerability in the event of a catastrophic adverse natural event,” said Secretary Purisima, stressing that the new financing operation gives the country flexibility to use the funds only if needed.
World Bank Country Director for the Philippines Bert Hofman, who signed for the World Bank, noted that CAT-DDO supports the country’s integrated framework for disaster risk reduction and management under its Disaster Risk Reduction and Management Act and its Strategic National Action Plan (SNAP) for Disaster Risk Reduction crafted in 2010.
“The Philippines has taken a proactive approach to deal with natural disasters by mainstreaming risk reduction into development planning, enhancing the government’s institutional capacity and reducing its fiscal exposures to natural calamities,” said Mr. Hofman. “Supporting this approach is crucial for achieving inclusive or broad-based growth.”
“The poor are among the most at risk from natural disasters. Increasing their resilience against disasters forms an important part of the World Bank’s assistance strategy for the country,” Mr. Hofman added.
The World Bank’s Board of Executive Directors discussed and approved the CAT-DDO on September 13, 2011. Drawdown from this new instrument will be triggered by a presidential declaration of a “state of calamity.”
The drawdown period is three years and renewable up to four times for a total of 15 years.
The CAT-DDO is the first financing for the Philippines signed for Fiscal Year 2012, and reaffirms the Bank's continued support to the country as discussed during meetings of Bank officials with the Philippines delegation at the Annual Meetings. Other areas lined up for Bank support in FY12 include health, education, and waste water management, and a possible Second Development Policy Loan.