Financial and Monetary Systems

How the World Bank Group is helping countries respond to natural disasters

Toolkit from World Bank Group is a valuable resource for countries facing the challenges of disaster recovery

Toolkit from World Bank Group is a valuable resource for countries facing the challenges of disaster recovery Image: REUTERS/Johannes P. Christo

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Humanitarian and Resilience Investing

  • The World Bank Group has announced a comprehensive toolkit to support countries in responding to natural disasters and other crises.
  • The toolkit includes a range of measures, such as pausing debt repayments, redirecting financing, and linking crisis preparedness and financing.
  • The World Bank estimates that the toolkit could help countries save up to $10 billion in debt payments over the next 10 years.
  • It is expected to be particularly beneficial for the most vulnerable countries, which are often the hardest hit by natural disasters.

The World Bank Group today announced a suite of new and expanded actions to help countries respond quickly and effectively to an ever-growing onslaught of crises.

At the Summit for a New Global Financial Pact, Ajay Banga announced an expanded toolkit for crisis preparedness, response, and recovery that includes: (1) pausing debt repayments; (2) redirecting financing; (3) linking crisis preparedness and financing; (4); backstopping development projects with private sector support, and (5) building enhanced catastrophe insurance without debt.

The World Bank Group aims to create a world free of poverty on a livable planet. We work to make people better prepared for threats of any kind by sharing our expertise, building resilience, and insuring against risks.

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How has the World Economic Forum helped initiate a more effective response to natural disasters and humanitarian crises?

Elements of the new comprehensive toolkit include:

1. Offering a pause in debt repayments so countries can focus on what matters, not worrying about the bill: To allow countries to focus on meeting the urgent needs of their people instead of on loan repayments, the World Bank Group will launch Climate Resilient Debt Clauses. These will pause debt repayments for the most vulnerable countries in times of crisis or catastrophe. We will start these new crisis debt clauses with the most vulnerable clients, and we intend to learn and work with all stakeholders to expand coverage.

2. Giving countries new flexibility to redirect a portion of their funds for emergency response quickly, so cash is immediately accessible: The World Bank Group will put in place a new rapid response option, offering all client countries the ability to immediately repurpose a portion of their lending portfolio for emergency needs when a crisis occurs – for example, to redeploy undisbursed funds in longer-term infrastructure projects for immediate disaster response.

3. Helping governments build advance-emergency systems, so they are ready to respond on day one: To allow more countries to build emergency systems and have quick-disbursing finance available in times of crisis, the World Bank Group will increasingly link investments in prevention and preparedness with financing for catastrophe and crisis response support. We will also step up our expertise and analytical support available to every country to design a crisis preparedness and response financing strategy.

4. Providing new types of insurance that will backstop development projects, allowing work to get back on track quickly: The World Bank Group will evolve its tools to more effectively support private sector clients in crisis preparedness and response. This will enable businesses to sustain operations and protect jobs, building resilience and long-term sustainability. The Multilateral Investment Guarantee Agency is partnering with the private insurance industry through the Insurance Development Forum, a public-private partnership, to design an innovative parametric insurance product, and the International Finance Corporation has designed a private sector-led crisis response solution to support financial institutions in addressing the impact of natural disasters due to climate change.

5. Building enhanced catastrophe insurance for providing resources without adding to debt: The World Bank Group will build on its catastrophe insurance solutions such as Cat Bonds and give all countries the option of embedding catastrophe insurance into lending products. Because not every country can afford this insurance, we will work with donors to make these products affordable for lower-income countries, including funds that can buy down insurance premiums. This will develop enhanced catastrophe insurance products that can provide resources for disaster-struck countries without adding to their debt.

Across countries, and as a result of these measures combined, billions of dollars could be available for crisis response.

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Financial and Monetary SystemsResilience, Peace and Security
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