World Bank strengthens disaster pooling fund

World Bank’s Board of Executive Directors has approved a USD500 million loan to strengthen Indonesia’s financial and fiscal resilience. The loan will help the country build and strengthen its financial response to natural disasters, climate risks, and health-related shocks.

From 2014 to 2018, the central government spent between USD90 million and USD500 million annually on disaster response and recovery, while local governments spent an estimated additional USD250 million over the same period.

The new project will support the Government’s National Disaster Risk Finance and Insurance Strategy by strengthening Indonesia’s fiscal and financial resilience through a Pooling Fund for Disasters. This fund will become the central mechanism through which post-disaster financing can flow from different sources. The fund will look to leverage domestic and international insurance markets to provide financial capacity to backstop the fund.

The project will also help ensure effective and transparent flow of the funds to relevant government agencies, including budget tracking on disaster-related expenditures, faster social assistance payments for victims of disasters, and improved preparedness planning for health shocks. Central and local government agencies will receive additional, faster, and more effective financial support after a disaster.

“The improved availability and flow of funds will ultimately support the population of Indonesia who will benefit from faster and better targeted response to disaster and health shocks. This will particularly benefit the poorest and most vulnerable, who are most affected by delayed disaster response and often lose their livelihoods and incomes, which keeps them in poverty,” said Satu Kahkonen, World Bank country director for Indonesia and Timor-Leste.