World Bank Releases US$500 million to Assist Philippine Government Address Impacts of Devastating Storm

December 29, 2011

Funds will help affected communities recover and restore, and help the country prepare

MANILA, DECEMBER 30, 2011—The World Bank today announced the immediate release of US$500 million to assist the Philippine government’s recovery and reconstruction efforts in the wake of tropical storm Washi, locally known as Sendong, which devastated parts of the country during December 17-18, 2011.

An estimated 720,900 individuals have been affected by the storm, with 4,620 injured and the death toll reaching almost 1,260 persons. The National Disaster Risk Reduction and Management Council has estimated the damage to infrastructure, agriculture and school buildings at over Php1.3 billion.

World Bank Acting Country Director Chiyo Kanda expressed sympathies to the Filipino people at this very difficult time.  “In natural disasters, it is the poor, including many women and children, who are particularly vulnerable. We hope the funds will give the Philippine Government flexibility to help families and communities recover, reconstruct vital infrastructure, and restore basic social services, as well as enhance the country’s preparedness for natural disasters in the future,” said Ms. Kanda.

Ms. Kanda, who went to the affected area last month for a project site visit—including Iligan and Cagayan de Oro that were heavily damaged by the storm—reinforced the Bank’s commitment to continue working with the government and other development partners in the short, medium, and long term, to build the resilience of affected areas and other parts of the country.

The funds come from the Disaster Risk Management Development Policy Loan with Catastrophe Deferred Drawdown Option (Cat-DDO), approved by the World Bank’s Board of Directors in September 2011. The Cat-DDO is a line of credit for the Government of the Philippines to enhance its capacity to manage the impacts of natural disasters.  The release followed President Benigno S. Aquino’s declaration of a State of National Calamity during his visit to areas affected by the storm and a request from the Philippine Government to access the US$500 million liquidity facility.

The Cat-DDO is one of many forms of assistance available from the World Bank Group to help borrowers plan efficient responses to natural disasters. It gives a government immediate access to funds after a major natural disaster, a time when available funds are often not adequate to meet the needs for reconstruction and recovery.  The US$500 million liquidity facility for the Philippines is the first of its kind in the East Asia and Pacific region. Other Cat-DDOs approved by the World Bank are in the Latin America and Caribbean region, for Colombia, Costa Rica, El Salvador, Guatemala, Panama and Peru.

The $500 million funding is complemented by a technical assistance program from the Global Facility for Disaster Reduction and Recovery (GFDRR) to support implementation of Republic Act 10121 or the Philippine Disaster Risk Reduction and Management Act of 2010, as well as its Strategic National Action Plan for Disaster Risk Reduction (SNAP), which serves as the road map in the coming ten years to improve disaster risk management.

Finance Secretary Cesar Purisima expressed appreciation for the quick response of the World Bank and the flexibility of the facility.  “The Cat-DDO is a quick and flexible source of financing for a country like the Philippines which is vulnerable to natural calamities,” Secretary Purisima said.

DPL with Cat-DDO

The Development Policy Loan with Catastrophe Risk Deferred Drawdown Option (DPL with Cat-DDO), is a form of contingent financing that offers immediate liquidity of up to US$500 million or 0.25 percent of a country’s Gross Domestic Product (whichever is less). Funds are disbursed upon request when a country suffers a natural disaster and declares a state of emergency. Eligible recipients must have an adequate macroeconomic framework in place at inception of the Cat-DDO, and a disaster risk management program that is monitored by the World Bank.

Cat-DDO Widely Used in Latin America

Like the Philippines, Latin American countries are highly exposed to natural disasters. Costa Rica was the first country to sign a Cat-DDO with the World Bank. Just months after signing a $65 million Cat-DDO, a 6.2 magnitude earthquake struck 20 miles north of San José. More than 120,000 people were affected. Costa Rica drew down $24 million of the Cat-DDO to rebuild damaged infrastructure. A year after Guatemala requested and received a $85 million DPL with a Cat-DDO (April 2009), two major natural disasters—eruption of the Pacaya Volcano and tropical storm Agatha—caused damages worth $982 million (approximately 2.6 percent of the 2009 GDP). The Government disbursed the full balance of the Cat-DDO to finance part of the reconstruction and other expenses.  Colombia too had prepared for this kind of natural disaster by signing a $150 million Cat-DDO on June 11, 2009. On December 28, 2010, Colombian authorities disbursed the full balance of the Cat-DDO to address a crisis caused by floods and landslides in the country’s worst rainy season in decades.


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