Home ECONOMY Kenya’s long walk to Sh20bn World Bank fund to tame disasters

Kenya’s long walk to Sh20bn World Bank fund to tame disasters

by biasharadigest

Kenya’s 18-year walk to accessing World Bank special credit line to respond to natural disasters has paid off with Sh7 billion ($70 million) being released by the Bretton Woods institution to respond to floods.

The Treasury document shows Nairobi, which was granted access to the Sh20 billion window in June 2018, drew the amount late last year after excessive rains in October caused floods and landslides in more than 30 counties.

This saved Kenya the pain of having to draw heavily from its already strained annual budget to respond to disasters as opposed to funding budgetary needs such as development projects.

The special World Bank window is called Catastrophe Deferred Draw-Down Option (Cat DDO), a 30-year credit line with a grace period of five years and usually with very low-interest rates.

“In addition to being a credit line that can provide immediate liquidity to the country when a natural disaster strikes, this instrument has promoted institutional reforms in the disaster risk management framework of the country,” the Treasury notes.

The window usually serves as early financing while funds from other sources such as bilateral aid or reconstruction loans are being mobilised.

The maiden loan means Kenya has now joined the list of other Cat DDO beneficiaries in Africa such as Seychelles, Malawi and Cape Verde, Madagascar and Morocco.

Other beneficiaries in the world have been Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Panama, Peru, the Philippines, Romania, Serbia, Seychelles and Sri Lanka.

But accessing this window that promises money within 36 hours of request has not been a walk in the park for Kenya.

Kenya had seen near misses in close to two decades, leaving the economy exposed as development funds were diverted into responding to natural disasters.

The government first developed a Disaster Risk Management policy in the year 2000. But this remained in draft form and kept being tweaked. Only in May last year was it approved by the Parliament.

The policy aims to increase the understanding of disaster risk, strengthen disaster risk governance, enhance preparedness for better response and ensure proper coordination when disaster strikes.

Countries without a national Disaster Risk Management policy do not qualify for Cat DDO.

World Bank can only fund countries at an advanced stage of preparing or already have a “satisfactory disaster risk management programme”.

This meant Kenya had to turn to its budget or expensive loans to deal with risks such as floods.

Kenya’s failure to put in place a comprehensive disaster preparedness policy meant that its response to events such as droughts, floods, epidemics and major accidents remained slow, poorly coordinated and unnecessarily expensive.

For instance, the drought in the 2016-2017 period adversely affected the growth of the agricultural sector, slowing down economic growth. This came with huge budgetary implications.

The floods experienced in 2018 also hurt infrastructures such as electricity poles and transformers, roads and bridges and therefore affecting households both directly and indirectly.

This forced the government to set aside Sh60 billion to respond to floods.

The amount was in addition to Sh17.5 billion infrastructure kitty that the State Department for Infrastructure had put aside to fix roads damaged by floods.

Kenya first came up with draft Disaster Risk Management policy draft in 2000 after the devastating effects of El Niño rains of 1997 and the bombing of the US Embassy in Nairobi in 1998.

However, the draft ran into numerous hurdles, hampering the approval.

First was the 2002 elections that resulted in a change of regime. This led to a breakdown in focus on the draft as the new government mulled new policy.

UK-based aid and development charity, Oxfam GB, was then hired in 2009 to conduct countrywide consultations in a bid to improve the draft.

This ended with a recommendation that Kenya forms a single agency to coordinate risk management. This was the birth of the National Disaster Management Authority.

Instead, the government opted for different agencies to address the disaster. Some of them were National Disaster Management Unit, National Drought Management Unit and National Disaster Operation Centre.

The implementation of the document would later be complicated by the Constitution that forced the draft to be revised to take into account new ministries and the 47 counties that devolution created.

While Kenya dithered for 18 years, countries like Uganda, Rwanda and Ethiopia benefited from the Kenyan draft to develop, pass and implement their policies.

According to the World Bank, extreme climatic events have long threatened development progress in Kenya, where 84 percent of the land is classified as arid or semi-arid.

A severe drought in Kenya between 2008 and 2011 affected 3.7 million people and caused Sh1.2 trillion ($12.1 billion) in damages and losses, according to a Global Facility for Disaster Reduction and Recovery-supported post-disaster needs assessment.

World Bank estimates that droughts and floods cost Kenyan economy more than two percent of gross domestic product (GDP) each year on average.

This means the Cat DDO will be crucial in saving it from diverting development budget to fund contingencies.

The government has in the past relied on ad hoc donor support.

Between 2002 and 2012, international donors provided on average Sh27.8 billion ($276 million) per year in humanitarian aid to Kenya, the World Bank data shows.

But with the policy approved, Kenya is now working to fully implement the Disaster Risk Management policy framework.

The Treasury says Kenya has already developed multi-hazard early warning system and preparedness and effected the National Drought, Emergency Fund.

Further, the government has been implementing National Disaster Risk Financing Strategy to improve its response to the impact of disasters.

This means improved efficiency in budget allocation and execution when a disaster strikes.

A solid risk financing strategy will see Kenya avoid incidences like that of 1999-2001 drought which affected 4.5 million people.

The government used about Sh34 billion to respond to this.

Yet, when it commissioned a study called ‘The Cost of Delayed Response,’ the finding was that only Sh17 billion would have been enough if proper coordination was in place.

“The extra amount was a cost to the national economy attributed to poor preparedness and a delayed response to this drought episode,” Kenya said in its 2009 policy draft.

The government seeks to strengthen and expand the portfolio of sovereign disaster risk financing instruments.

Cat DDO now complements the Pandemic Emergency Financing Facility (PEF) developed by the World Bank as a global solution to strengthen risk management.

“Together, the Cat DDO and PEF provide Kenya with liquidity (on different terms and conditions) and help strengthen resilience to shocks” World Bank notes.

Related Posts