ADB indicates funding to be insufficient
The Asian Development Bank (ADB) said in a report on Tuesday that it is not enough to cover the costs of natural disasters.
Private disaster risk insurance solutions have minimized market penetration, according to a report titled “Breaking the Disaster Protection Gap in Central Asia.”
“These problems are compounded by the complex external financing situation at the national level, which makes it difficult to quickly and cheaply access debt after a disaster,” the report said.
“Low levels of financial inclusion increase Pakistan’s vulnerability to disasters [more frequent floods and earthquakes],” the report added. Past disasters highlight the difficulties Pakistan faces with floods costing farmers in Punjab Rs 32.6 billion ($326 million) in 2010 and 2015, but the report says the Pakistani government is paying Rs 6.7 billion to paid farmers.
ADB indicates funding to be insufficient
“As national and local disaster relief funds work better, there appears to be a need to increase the scope and depth of existing risk management tools for high-frequency incidents,” the report said. “This can be complemented by the use of risk transfer instruments that can bear the cost of emergency response and/or the cost of recovering assets damaged or destroyed by low-frequency, high-intensity events”.
According to the ADB report, these activities were consistent with the work plan established by the Disaster Risk Financing Unit (DRFU) of the National Disaster Risk Management Fund (NDRMF).
The report recalled that the National Disaster Management Fund and a separate disaster management fund managed by each local government were established under the National Disaster Management Act in 2010. However, “a lot of work remains to be done to standardize the operation of the funds and the proper funding mechanisms and procedures across all provinces,” he said.
According to the report, the federal government typically allocates between $15 million and $20 million in emergency funds to respond to national emergencies, and the World Bank’s 2019 report reported $10.6 million in federal funds. With ADB’s support, a separate disaster risk financial management department was established under the National Emergency Risk Management Fund to enhance the effectiveness of natural risk management.
According to a market report that 70% of property insurance covers earthquakes according to ADB analysis, it can be assumed that insurance is likely to cover a high percentage of earthquake losses.
