World Bank To Offer Countries Access To Emergency Funds From Existing Loans

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The World Bank approved new measures on Thursday that will enable member countries facing natural disasters and other shocks to access emergency funds from their existing loan programs quickly. The move will help countries in response to an increasingly crisis-prone world.


With the enhancements to the bank’s Crisis Preparedness and Response Toolkit, countries can quickly receive up to 10% of undisbursed funds from an existing project loan or other facility for emergency response. This means that a country with $3 billion undisbursed from a $5 billion loan portfolio could immediately access $300 million in case of a hurricane, earthquake or pandemic, which could save a lot of hardship.


According to Anna Bjerde, World Bank’s Managing Director for Operations, many low-income and middle-income countries have expressed their concerns about being financially unprepared when a crisis hits. They often have to make terrible trade-offs to manage the situation. Therefore, the bank has introduced measures that will help the countries better prepare for crises.


The World Bank will also scale up access to larger pre-arranged emergency crisis financing in future loan programs. These programs will require crisis-preparedness reforms and other institutional measures to build resilience.

The World Bank executive board has approved a third component that will broadly expand the use of catastrophe insurance products. These products include catastrophe bonds that provide insurance payouts in the event of hurricanes or other disasters that meet certain thresholds. Jamaica has been a pioneer in such bonds, and World Bank President Ajay Banga has called for their expansion to protect vulnerable countries’ budgets from climate and other threats.


Under this initiative, funds from project loans that catastrophe bonds would protect can be used to pay fees to arrange their issuance, costs that are currently borne by the countries issuing them.

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