Treasury says it wants to reduce fiscal pressure and macro-economic instability caused by natural disasters by ensuring that resources are channeled efficiently to beneficiaries and continued disaster risk reduction efforts.
In its Disaster Risk Financing and Implementation Plan (2019-2024), Treasury expects disasters to increase due to rapid population growth, urbanisation and environmental degradation; hence, the need to enhance resilience.
The plan says currently, government relies on short-term and budget re-allocation and external assistance to finance disaster response which is not only unpredictable, but also untimely in most instances.
“It would, therefore, be cost-effective to arrange financing according to a risk layering approach to mitigate the financial impact of disaster events of different frequency and severity.
“Typically, optimal combinations of risk financing instruments include a combination of risk retention and risk transfer instruments,” reads the policy document in part.
For instance, in 2016, drought-related charges and losses to the economy amounted to $370 million (about K273 billion), which was equivalent to 5.6 percent of gross domestic product (GDP).
Droughts had the greatest impacts on agriculture, ($263 million), followed by the utility ($14 million) and manufacturing ($6.9 million).
In 2015, damages and losses due to flood amounted to $335 million (about K247 billion) or five percent of GDP.
The subsectors most hit in 2015 floods were housing ($139 million), agriculture ($68 million), transportation ($50 million), water and sanitation ($26 million), education ($12 million), health ($12 million) and industry and trade ($11 million).
Secretary to the Treasury Cliff Chiunda said management of fiscal impacts from disasters is its highest priority because over the last decade, the intensity, frequency and economic impacts of disasters have been increasing leading to large-scale fiscal losses.