Kenya to access US$150m World Bank disaster kitty- official

Kenya to access US$150m World Bank disaster kitty- official

Eric Dickson, Senior Disaster Risk Management Specialist at the World Bank and project lead for the Cat DDO.

Eric Dickson, (in blue suit) Senior Disaster Risk Management Specialist at the World Bank and project lead for the Cat DDO.

Francis Muraya (In dark suit), Senior Disaster Risk Management Specialist at the World Bank

Francis Muraya (In dark suit), Senior Disaster Risk Management Specialist at the World Bank

By James Ratemo,

Kenya now has a chance to cushion itself from effects of catastrophic disasters following World Bank’s announcement that the largest East African Economy, recently declared a middle income country, can access upto US$150million to battle disasters.

At Kenya’s Fourth Symposium on Disaster Risk Management, the World Bank announced it has started working with the Government of Kenya to set up a contingent financing instrument for disaster response – a Development Policy Loan with a Catastrophe Deferred Drawdown Option (Cat DDO)

Also read: fourth-national-disaster-risk-reduction-symposium-declaration-in-nanyuki

Thanks to its imminent transition to middle income country, Kenya will be the second African country to access this financial product. By providing rapid liquidity in the event of a national emergency, the Cat DDO will greatly enhance the government’s ability to respond to crises.

The Cat DDO is like a credit card that you only use if need be.

Through the facility Kenya can access between US$100million and US$150million meaning in case of a disaster the country can use the funds to rebuild without having to interfere with its development budget.

This work is part of a broader engagement on resilience between the World Bank and the Government of Kenya and complements national efforts to enhance resilience, including the proposed Disaster Risk Management Bill sponsored by Honourable Tiyah Galgalo, Women Representative, Isiolo County.
“At the World Bank, we are pleased to be working to set up a contingent credit line that will provide the Government access to much needed financial resources in the aftermath of a disaster. Ultimately, this will reduce the negative impacts of disasters on the people and economy of Kenya.” Said Eric Dickson, Senior Disaster Risk Management Specialist at the World Bank and project lead for the Cat DDO.

“The establishment of a clearly defined institutional structure for disaster risk management is key for Kenya as it steps up efforts to enhance resilience to the growing impacts of disasters” said Francis Muraya, Senior Disaster Risk Management Specialist at the World Bank.“By creating a platform for improved coordination among the various actors working on risk management and crisis response, the proposed Bill will be instrumental in the successful implementation of the new contingent loan we are preparing”.

Mr. Muraya said Kenya should swiftly take up the opportunity as an insurance against catastrophic disasters.
“When a country is hit by a major disaster, World Bank offers liquidity for it to rebuild and stabilize,” explains Mr. Muraya.
In Africa, it is only Seychelles that has accessed the funds and Cape Verde is in the process of signing up.
Other countries that have benefited from this facility include the Philippines.

“This is good for Kenya but it must have a legal framework on how to handle disasters to access this financial instrument,” adds Mr. Muraya.

Kenya is no longer considered a developing country but a middle income country following the rebasing of its GDP. Download rebasing facts for Kernya
Already Isiolo County Women Representative Tiyah Ali Galgalo is sponsoring a bill that will see Kenya edge closer to fulfilling the requirements. The Disaster Risk Management Bill, 2016, is at National Assembly committees stage after which it will become law if it sails through the remaining process.

The bill envisions to establish a National Disaster Risk Management Authority and a special fund to replace the current system where many agencies are involved in handling disasters in an uncoordinated manner.
A key item in the declaration on Thursday is to push for the bill to be passed and secure the country’s opportunity to access the World Bank’s CAT DDO facility.

According to Col Nathan Kigotho, Director, National Disaster Operations Centre (NDOC), Ministry of Interior and Coordination of National Government, the bill is a welcome move, which is long overdue. It will see Kenya access the World Bank disaster kitty (CAT DDO) which will act like an insurance policy against major disasters.

“We now have a policy and the bill which must be presented to the cabinet for approval so that the Interior Ministry can forward it to Parliament for debate and passing.”

The National Disaster Management Authority will be in a good position to handle all stages of disaster right from mitigation, response and recovery.
Currently there is no proper funding for preparedness and NDOC often responds to disasters when it is often too late.
“We do not have a proper organisational framework. Our centre (NDOC) is inadequate since we have to depend on other players whom we have to mobilise,” he adds.
“The Bill creates an organizational structure with budget from exchequer, as it stands NDOC gets financing from the Interior Ministry and the allocation is never enough. The Bill will also show what Counties’ roles and responsibilities are in management of disasters,” says Col Kigotho.
According to the Kenyan Constitution, management of disasters is a shared responsibility between the national and county governments.

More about Cat DDO (Source: World Bank)

Catastrophe Deferred Drawdown Option (Cat DDO) is a contingent credit line thatprovides immediate liquidity to IBRD member countries in the
aftermath of a natural disaster. It is part of a broad spectrum of risk financing instruments available from the World Bank Group to help borrowers plan efficient responses to natural disasters.
The Cat DDO gives a government immediate access to funds after a natural disaster, a time when liquidity constraints are usually highest. This type of financing is typically used tofinance losses caused by recurrent natural disasters. It is most effective as part of a broader risk management strategy in
countries highly exposed to natural disasters.
A disaster risk management strategy would involve complementing the Cat DDO with disaster risk transfer instruments (such as catastrophe risk insurance or catastrophe bonds) for high risk layers. Governments determine the mix of disaster risk financing instruments based on an assessment of risks, desired coverage, available budget, and cost efficiency.
Key Features
The Cat DDO allows borrowers to prepare for a natural disaster by securing access to a financing source before a disaster strikes. Essentially, the Cat DDO serves as bridge financing while funds from other sources (e.g., concessional funding, bilateral aid, or reconstruction loans) are being mobilized. Under the Cat DDO, borrowers can secure immediate access to financing up to US$500 million or 0.25% of GDP (whichever is less).
The Cat DDO has a “soft” trigger, as opposed to “parametric.” Funds become available for disbursement after the declaration of a state of emergency due to a natural disaster. The Cat DDO also has a revolving feature, which means that amounts repaid during the drawdown period are available for
subsequent withdrawal. The three-year drawdown period may be renewed up to four times, for a maximum of 15 years in total.
In order to gain access to the Cat DDO, the borrower must implement a disaster risk management program, which the Bank will monitor on a periodic basis.

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