Disaster Risk Management: National Systems for the Comprehensive Management of Disaster Risk and Financial Strategies for Natural Disaster Reconstruction

Abstract

This report was commissioned by the Natural Disasters Network of the Regional Policy Dialogue. This report constitutes Phase 2 of this project. While the first phase of the study discusses the components of a national system, the second focuses on instruments for financing reconstruction after a disaster. The research compares centralized, government-directed management systems with those that are localized and decentralized, and also analyzes the factors affecting the financial and political stability of alternative approaches. As natural disasters may result in major resource gaps for governments facing the task of financing reconstruction, the report presents case studies of four countries-Bolivia, Colombia, the Dominican Republic, and El Salvador-to highlight the various policy options. Alternative sources of ex ante funding are identified, including reserve funds, contingent credit, and insurance. These innovative methods of funding are compared with ex post funding possibilities through international aid, loan diversions and increased external debt, budget reallocations, and tax increases.