THE World Bank and the national government have recently signed the $500 million worth financing agreement for the Catastrophe Deferred Drawdown Option (CAT-DDO) loan for the Philippines’ emergency relief and post-disaster reconstruction needs.
The loan, which aims to help the country improve its disaster preparedness efforts and reduce its vulnerability to disasters, was signed by World Bank Philippines Country Director Bert Hofman and Finance Secretary Cesar Purisima at the World Bank Headquarters in Washington over the weekend.
“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. Supporting this approach is crucial for achieving inclusive or broad-based growth,” Hofman said.
The 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 was signed in support of the country’s integrated framework for disaster-risk reduction and management enshrined in Republic Act 10121 (Disaster Risk Reduction and Management Act) and the Strategic National Action Plan for Disaster Risk Reduction (SNAP) crafted in 2010.
The World Bank said the Philippines is among the most vulnerable countries in the world when it comes to natural disasters. Every year, more than 1,000 lives are lost due to natural disasters. These disasters include typhoons which account for 74 percent of the fatalities, 62 percent of the total damages, and 70 percent of agricultural damages, reflecting their high-annual frequency.
According to the National Disaster Risk Reduction and Management Council (NDRRMC), between 1990 and 2008, the country incurred average annual direct damages to agriculture, infrastructure and the private sector of around P28 billion, which is equivalent to about 0.7 percent of GDP. Damage to agriculture alone averaged P12.4 billion annually.
“[The loan] will also help reduce the country’s fiscal vulnerability in the event of a catastrophic adverse natural event,” Purisima said, stressing that the new financing operation gives the country flexibility to use the funds only if needed.
Earlier, state-owned think tank Philippine Institute for Development Studies (PIDS) released a Policy Note which showed that the average annual economic damages caused by typhoons between 1990 and 2009 may have cost the Philippine economy around P11.193 billion or $240.7 million per year.
Based on the study, from 1990 to 2009, the total value of damages due to weather and climate-related disasters amounted to $4.813 billion, or an average of $240.7 million per year. In the 2000s total damages amounted to $2.121 billion, lower than the total damages of $2.602 billion in the 1990s.
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.
