WASHINGTON, D.C., March 14, 2022 – To support the Panamanian government’s efforts to manage the risk of disasters resulting from natural and health-related hazards, including the adverse effects of climate change and disease outbreaks, the World Bank Board of Directors today approved a Development Policy Loan with a Catastrophe-Deferred Drawdown Option (DPL with Cat DDO).
"This loan represents a significant advantage for Panama in advancing fiscal management of risk, given that our government will have timely access to financial resources to provide an effective response, which contributes to fiscal stability in disaster situations," said Economy and Finance Minister Héctor Alexander. “We are committed to developing strategies to manage fiscal risk to strengthen economic resilience and benefit the most vulnerable population.”
This project is the second development policy loan to strengthen the disaster risk reduction agenda in Panama. It is noteworthy for including a new parameter related to "pandemic emergencies." The first contingent loan was for US$ 66 million, approved by the World Bank Board of Directors on October 18, 2011 and disbursed in two tranches. In 2016, an initial disbursement of US$ 25 million helped mitigate the impact of the drought caused by El Niño. On that occasion, timely access to funds enabled the country to implement critical response activities, including an emergency plan to drill wells in the most drought-affected regions.
Panama requested the second disbursement of US$41 million on March 25, 2020, just 12 days after declaring a State of National Emergency due to the pandemic. That financing provided an immediate liquidity injection while additional resources were being obtained to assist the population affected by COVID-19.
“This financing mechanism has served other countries in the region, such as El Salvador, Honduras and Costa Rica, and will be an extremely effective part of the strategy for disaster risk management in Central America, especially during the post-COVID-19 phase.” said Michel Kerf, World Bank director for Central America and the Dominican Republic. “Our goal is to support the institutional capacity of countries to make it easier for them to address liquidity shortfalls during an emergency, without the need to redirect resources already earmarked for social and development investments.”
As well as strengthening its fiscal management capacity, Panama has consolidated its public policy framework to prevent risk and improve its disaster response, significantly reinforcing its institutional capacity through the adoption of several preventive and response tools. This has substantially improved its position with respect to prospective and inclusive disaster risk management.
The Cat DDO is a flexible loan with a maturity period of 19.5 years, including a three-year grace period. It has an average repayment schedule of 12 years.
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