The Asian Development Bank said Thursday it approved a $500-million policy-based loan to give the Philippines quick access to emergency financing in the event of disasters triggered by natural hazards or public health emergencies that result in a declaration of a state of calamity.
“The Philippines has been hit by several major disasters in recent years, including Typhoon Haiyan [Yolanda] in 2013, the Taal Volcano eruption in January 2020 and the ongoing coronavirus disease pandemic,” said ADB vice-president Ahmed Saeed.
“This new contingent disaster financing instrument will help the government manage fiscal risks posed by those shocks and lessen the economic and social impacts on people’s livelihoods and the country’s economy,” he said.
Located in the Pacific Ring of Fire, the Philippines is among the most disaster-prone countries in the world, including active volcanoes, frequent earthquakes and an average of 20 typhoons a year causing floods and landslides.
Nearly three-fourths of the country’s population are vulnerable to multiple natural hazards, and such disasters worsen poverty in typhoon-prone provinces along the country’s eastern seaboard.
Disasters cost the Philippines 0.7 percent to 1.0 percent of gross domestic product every year, including about P43.5 billion ($890 million) caused by earthquakes and around P133 billion ($2.7 billion) from typhoons.
“The Disaster Resilience Improvement Program will support government policy reforms aimed at ensuring the government can quickly address the needs of vulnerable segments of the population following disasters. It will also strengthen the Philippines’ overall response to disasters and pandemics,” said ADB financial sector specialist for Southeast Asia Benita Ainabe.
The program is supporting pending legislation in Congress to merge the functions of the National Disaster Risk Reduction and Management Council and the Office of Civil Defense under a new Department of Disaster Resilience to speed up the government’s disaster response and substantially reduce coordination and bureaucratic inefficiencies.
The program supports reforms to make climate change adaptation and disaster risk reduction an integral part of comprehensive development plans of local government units.
It will support a pilot disaster insurance scheme, the first of its kind in Southeast Asia, in several cities across the country to bolster their fiscal resilience. It also aims to provide a predictable, timely source of financing for post-disaster response. The program will help local governments improve medium-term pandemic preparedness and introduce reforms beyond the government’s immediate COVID-19 response needs.
ADB has provided significant post-disaster support to the Philippines since the 1980s, especially after Typhoon Haiyan. ADB’s rehabilitation and reconstruction assistance for damaged public assets in the country is valued at around $1.8 billion in inflation-adjusted terms. It has also provided at least $1.8 billion in loans and grants to assist the government in its urgent COVID-19 response.