Boosting Financial Resilience to Disaster Shocks : Good Practices and New Frontiers
Governments face growing contingent liabilities from disasters as they tend to shoulder a significant share of disaster response and recovery costs. Disaster shocks increase government expenditure and hamper economic activities. An increasing numb...
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| Format: | Technical Paper |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/239311559902020973/Boosting-Financial-Resilience-to-Disaster-Shocks-Good-Practices-and-New-Frontiers-World-Bank-Technical-Contribution-to-the-2019-G20-Finance-Ministers-and-Central-Bank-Governors-Meeting http://hdl.handle.net/10986/31887 |
| Summary: | Governments face growing contingent
liabilities from disasters as they tend to shoulder a
significant share of disaster response and recovery costs.
Disaster shocks increase government expenditure and hamper
economic activities. An increasing number of countries are
developing financial protection strategies - a suite of
policies and financial instruments - as part of their
macro-fiscal policy to secure access to pre-arranged
financing and protect the fiscal balance and budget when
disasters strike. Investments in physical and social
resilience complement and reinforce financial resilience.
Pre-arranged risk financing can help governments reduce the
fiscal cost of disasters. Sovereign catastrophe risk pools,
established to help especially low-capacity countries better
access financial markets, are evolving toward
multifunctional platforms to strengthen financial resilience
in their region. Governments are moving toward adopting
more sophisticated risk financing strategies that better
match financial instruments to their liabilities, especially
for public assets (including infrastructure),
national-subnational cost sharing, and social safety nets.
New technology and innovations such as Earth Observation
Data, Fintech, and big data have the potential to
significantly enhance and boost systems for financial
resilience against disaster shocks. Development partners
continue to play a critical role in helping developing
countries improve their financial protection strategies.
Recent experiences of G20 countries and others have led to
three new frontiers on innovative crisis and disaster risk
finance. Although significant progress has been achieved in
disaster risk finance, some limitations and challenges
remain. All successful reforms start with concrete first
steps and an ongoing focus on enhancing fundamental systems
and institutions. Financial resilience requires the
leadership of ministries of finance in coordination with
other public agencies and the private sector. At the request
of G20 Finance Track members, this discussion note was
prepared to: (i) take stock of the developments in fiscal
management of disaster risks within the broader macro-fiscal
framework; (ii) highlight recent progress by individual
countries and the international community; and (iii) present
new frontiers in disaster risk finance. |
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