The World Bank has approved $150 million in contingent financing for Nepal to address natural or climate-induced hazards and health emergencies. The financial support, known as the Nepal Disaster Resilience Development Policy Credit with Catastrophe Deferred Drawdown Option (Cat DDO), aims to bolster policy and regulatory reforms that enhance disaster resilience and improve institutional mechanisms for effective disaster response.
This initiative is designed to aid the government of Nepal in improving early warning systems and developing policies, institutions, and regulatory frameworks necessary for risk reduction and investment in critical infrastructure. It also focuses on increasing preparedness for public health emergencies.
Contingent financing through the Cat DDO offers immediate liquidity following a disaster, providing an additional tool for the government's disaster response and recovery efforts. This is crucial for addressing post-disaster needs across all levels of Nepal's federal system.
"As the flooding of recent weeks has shown, Nepal is facing a polycrisis of natural and climate-induced hazards and health emergencies, putting the country at ever-increasing risk of serious financial shocks," stated David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka. "This operation supports the government’s reforms to build resilience against these escalating risks and provides a line of credit that can be accessed immediately following a disaster or public health emergency to ensure a timely and effective response."
The Cat DDO serves as an innovative disaster risk financing instrument enabling rapid government response to emergency needs without diverting resources from ongoing development programs. It will work alongside existing mechanisms like the National Disaster Management Fund and the Prime Minister’s Disaster Relief Fund.
Technical assistance and grant funding from various international organizations support this operation. These include the Global Facility for Disaster Risk Reduction and Recovery (GFDRR) and the Earthquake Housing Reconstruction Multi-Donor Trust Fund backed by Canada, USAID, FCDO, and SDC.