In February 2025, Bhutan signed a US$40 million agreement with the World Bank under the International Development Association (IDA) for Climate and Disaster Resilience Development Policy Financing with a Catastrophe Deferred Drawdown Option (Cat DDO). This financial instrument gives Bhutan immediate access to funds in the event of natural disasters or health emergencies.
This is the second time Bhutan has used a Cat DDO. The first operation, valued at US$15 million and approved in 2020, helped manage the country’s response to the COVID-19 pandemic. These actions mark an ongoing partnership between Bhutan and the World Bank focused on improving disaster risk management.
Over the past decade, Bhutan has dealt with several challenges including severe flooding, increased risk from glacial lake outburst floods, earthquakes, and significant emigration that has reduced technical capacity in key sectors. Despite these challenges, Bhutan continues to prioritize resilience through its 13th Five Year Plan by integrating disaster and climate risk management into national institutions and infrastructure planning.
The World Bank has supported reforms in Bhutan through projects like Strengthening Risk Information for Resilience in Bhutan. This initiative is funded by the Climate Investment Funds (CIF), Global Facility for Disaster Reduction and Recovery (GFDRR), and includes support from the Japan-World Bank Program for Mainstreaming Disaster Risk Management in Developing Countries. Efforts have included work with agencies such as the Ministry of Infrastructure and Transport (MoIT), National Center for Hydrology and Meteorology, Department of Local Governance and Disaster Management under the Ministry of Home Affairs, and Property Assessment and Valuation Agency under the Ministry of Finance.
Key reform areas include integrating resilience into infrastructure development, strengthening emergency preparedness, and improving financial resilience. Recommendations have also been made by the World Bank and GFDRR regarding updates to policies like the National Aviation Policy, National Surface Transport Policy by MoIT, telecommunication procedures during disasters managed by Government Technology Agency, and proposed amendments to disaster management legislation.
A Crisis Preparedness Gap Analysis led by the World Bank in 2024 identified critical areas needing reform which informed recent policy financing efforts.
“These reforms reflect a shift from reactive response to proactive planning—moving Bhutan closer to a whole-of-government resilience strategy,” said Cecile Fruman, World Bank Acting Country Director for Bhutan.
Fruman added: “This partnership is about more than access to funds—it’s about building the systems, institutions, and culture that allow a country to withstand shocks and continue to grow.”
The collaboration between Bhutan, the World Bank, GFDRR, and CIF aims not only at financing but also co-developing approaches that can serve as models for other small or vulnerable nations facing similar risks.