WASHINGTON, December 12, 2019 — The World Bank today approved a $50 million Disaster Risk Management Policy Grant from the International Development Association (IDA)* with a Deferred Drawdown Option for Catastrophe Risks (Cat DDO)**, along with a EUR 10 million ($11.7 million equivalent) credit in co-financing from the French Development Agency (AFD).
“As we approve this financing, my thoughts go to the families affected by the recent cyclone Belna in the northwest of Madagascar,” noted Marie-Chantal Uwanyiligira, World Bank Country Manager for Madagascar. “This program seeks precisely to enhance the country’s ability to prepare for natural disasters and provide financing to ensure an immediate help to those in need.”
The Disaster Risk Management Development Policy grant with Catastrophe Deferred Drawdown Option (Cat DDO) will provide Madagascar with rapid access to financing in the event of a natural catastrophe, while supporting key reforms that strengthen the country’s system for disaster risk management; financial resilience to disasters; and mainstreaming disaster and climate resilience into territorial and urban planning. The fund will be available in the event of future catastrophes within three years of signing the grant, but renewable for a further three years. Drawing down from the Cat DDO will be triggered by a declaration of national state of emergency, following Madagascar’s laws.
“Damages and losses from disasters have a high economic and fiscal impact on Madagascar that can reverse years of progress. Disasters disproportionately affect the most vulnerable and therefore pose an important obstacle to poverty reduction if adequate measures are not taken”, said Michel Matera, World Bank senior Urban Specialist and the project’s task team leader.
Madagascar is one of the countries in the world most exposed to disaster risk. Between 2009 and 2018, Madagascar was hit by 27 cyclones and tropical storms, always followed by significant floods.A recent catastrophe risk modeling study estimates that Madagascar faces average annual losses of $100 million for cyclone and flood combined hazards and that every year, there is a 10 percent probability that damages will exceed $240 million and a 5 percent probability that they will exceed $600 million. In addition to the potential impact of natural hazards, Madagascar is also vulnerable to emerging epidemics. Epidemics accounted for 35 percent and cyclones for 33 percent of total shocks between 2005 and 2018.
“It is important for the French Development Agency to support the government in implementing disaster risk management reforms and, at the same time, provide immediate financial assistance in case of a disaster. This approach is complementary to the infrastructure projects in the main cities in Madagascar being financed by AFD, said JérômeBertrand-Hardy, AFD Director for Madagascar.“This is the very first Cat DDO AFD is involved in and we are very pleased that it was jointly prepared with the World Bank, a major partner, and to the benefit of Madagascar.”
Madagascar has started to shift its focus from post-disaster relief operations to proactive Disaster Risk Management (DRM) and measures to increase climate resilience. Since 2015, the country has made important progress in strengthening its DRM framework. Despite this progress, Madagascar’s DRM policy framework still has several strategic, financial, and sectoral shortcomings. Through this Cat DDO, Madagascar will be strengthening further the institutional framework and coordination mechanisms to advance its national disaster and climate adaptation agenda. This instrument will also strengthen the Government financial capacity to respond to disasters and will foresee the establishment of a social protection system that is shock responsive and would allow to channel disaster assistance to disaster-affected poor.
Cat DDOs are relatively new financial instruments for IDA countries. The Madagascar operation is the fifth Cat DDO in Africa after Seychelles, Kenya, Malawi and Cabo Verde.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 76 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.6 billion people who live in IDA countries. Since 1960, IDA has supported development work in 113 countries. Annual commitments have averaged about $21 billion over the last three years, with about 61 percent going to Africa.
** Catastrophe Deferred Drawdown Option (Cat DDO) is a contingent credit line that provides immediate financing to countries in the aftermath of a natural disaster. Cat DDOs help develop a country’s capacity to manage the risk of natural disasters and should be part of a broader preventive disaster risk management strategy.