through financial instruments such as the Cat DDO.
Cat DDO stands for “Catastrophe Deferred Drawdown Option.” It is an innovative contingent line of credit that can provide immediate liquidity to countries in the aftermath of a disaster resulting from an adverse natural event. The World Bank has made it available to countries since 2008, to make it possible for them to have quick access to financial resources upon the declaration of state of emergency in the aftermath of a disaster, following an adverse natural event and in accordance with local legislation. The funds that provide liquidity to the countries are preapproved based on a sound disaster risk management program and an adequate macroeconomic framework.
[Read: Disasters, funds, and policy: Creatively meeting urgent needs and long-term policy goals]
- It serves as an early financing tool while funds from other sources such as government reallocations, bilateral aid, or reconstruction loans/credits become available.
- It allows the countries to address the emergency without distracting resources from their social and development programs.
- It enhances the countries’ financial capacity to prepare for disasters.
- It also generates or consolidates a dialogue on disaster risk management between the countries and the World Bank to learn from experience and apply good practices.
What are some of the examples of “Cat DDOs in action”? How will this innovative tool evolve to better manage increasing disaster risks? Watch a video with World Bank Senior Director Ede Ijjasz-Vasquez (@Ede_WBG) and Senior Disaster Risk Management Specialist Armando Guzman to learn more.