MANILA, Philippines — The Philippines can immediately release funds to mobilize response in the aftermath of a natural disaster or at the onset of a disease outbreak through a new $500-million loan extended by the World Bank (WB).
The multilateral lender’s Washington-based board on Nov. 17 approved the Philippines’ fourth disaster risk management development policy loan with a catastrophe-deferred drawdown option (CAT-DDO 4), a fast-disbursing credit line.
With CAT-DDO, “the country can access funds upon the declaration of a state of calamity by the Republic of the Philippines due to an imminent or occurring natural catastrophe or a declaration of a state of public health emergency,” the World Bank said in a statement on Thursday. Due to the COVID-19 pandemic, the Philippines is currently under a state of calamity, which President Duterte had extended until September 2022.
World Bank loans with CAT-DDO “serve as early financing while funds from other sources such as bilateral aid or reconstruction loans are being mobilized,” the bank had explained.
Support
The Philippines already benefited from World Bank loans with CAT-DDOs in 2011 and 2015, both amounting to $500 million.
The first CAT-DDO green-lit by the World Bank a decade ago was the first-of-its-kind liquidity facility in Asia-Pacific.
Last year, the $500-million third disaster risk management development policy loan approved by the World Bank did not have a CAT-DDO because the financing was to be spent on COVID-19 response.
As for CAT-DDO 4, the World Bank said the loan’s full amount will be available three years after it takes effect, or upon signing the loan agreement with the Philippines.
“This gives the government access to immediate liquidity to better manage the cost of shocks and protect the Filipino population. The government can renew this line of protection with the World Bank for up to a total period of 15 years,” it said.
The Department of Finance borrowed CAT-DDO 4 on behalf of the Philippine government.
In particular, CAT-DDO 4 “supports ongoing government efforts to strengthen disaster response and recovery policies and planning” such as mainstream use of preapproved disaster rehabilitation and recovery plans which the World Bank said could “speed up access to funding from the national government for postdisaster recovery.”
“In the aftermath of disasters, skilled workers in areas like construction, welding, electrical installation and maintenance, pipe-laying, heavy equipment operation, and food production are crucial for reconstruction and rebuilding. Part of the program will support strengthening delivery of community-based technical and vocational training,” the World Bank said.
“This CAT-DDO 4 also supports government efforts to integrate climate risk management in the preparation of provincial commodity investment plans among local government units, which can lessen the extent of agricultural and fisheries damage resulting from natural hazards and extreme weather events,” it added.
World Bank senior disaster risk management specialist Lesley Jeanne Cordero said the CAT-DDO 4 financing would “enable local governments to take stock of climate actions, track and report climate change expenditures to inform investment planning and programming for risk resiliency,” especially next year when local governments assume bigger responsibilities alongside their larger budgets with the implementation of the Supreme Court’s Mandanas-Garcia ruling in full swing.
Protection, cushion
For his part, World Bank country director for Brunei, Malaysia, the Philippines and Thailand Ndiamé Diop said “this contingent funding mechanism protects the Philippines’ fiscal health following natural disasters and disease outbreaks, helps develop sustainable risk financing mechanisms for local government units, and cushions poor and vulnerable households from the impact of disasters.”
“If not managed well, these shocks can exacerbate poverty through the loss of lives, destruction of assets, disruption of economic activities and trade, and indirect impacts on health, mobility and access to education,” Diop said.
The World Bank noted that the Philippines’ unique geography—an archipelago in the so-called Pacific Ring of Fire—exposes the country to a wide array of natural calamities like earthquakes and volcanic eruptions.
The Philippines is also located in a typhoon belt which makes millions of Filipinos vulnerable to flooding, landslides, storm surges as well as tsunamis.
With the approval of CAT-DDO 4, 12 forthcoming loans worth a total of $2.45 billion remain in the World Bank’s near-term pipeline for the Philippines.
Also scheduled to be approved by the World Bank this month is the $200-million multisectoral nutrition project. In December, the lender’s board is expected to green-light the $300-million financing to buy booster shots and jabs for children under the expanded mass vaccination program.