Due to its location, topography, and socioeconomic conditions, Madagascar is one of the most exposed and vulnerable countries in the world to climate change and extreme weather events, with cyclones, flooding, and drought posing the greatest risks. Madagascar and other Indian Ocean countries have recently been affected by Tropical Cyclone Belna in December 2019, which followed tropical cyclones Idai and Kenneth that also hit the same region earlier in 2019. According to a catastrophe risk modeling study from the World Bank, Madagascar faces annual losses of US$ 100 million in cyclone and flood damages. Madagascar’s recent spate of extreme weather events underlines the need to find innovative and sustainable solutions to tackle the impact of natural disasters, including by developing specific instruments for risk management and financing of disaster shocks.
In the last few years, the Government of Madagascar has been able to transition from a post-disaster relief focus to the adoption of disaster risk management and climate change resilience strategies, building on important long-term engagement with several development partners, including the French Development Agency (Agence Française de Développement – AFD), the European Union (EU) the Global Facility for Disaster Reduction and Recovery (GFDRR) and the World Bank. The Government of Madagascar has prioritized improving financial resilience to natural hazards and integrating disaster risk management and climate change considerations in its planning and strategy development processes. Key milestones in this progress include the adoption of a strong DRM policy framework and a range of strategies for DRM and climate change adaptation, such as the National Disaster Risk Management Policy and the National Disaster Risk Management Strategy (2016–2030).
In line with these recent efforts to strengthen Madagascar’s DRM institutional framework and to help meet its immediate need for liquidity in the aftermath of a natural catastrophe, on December 12, 2019, the World Bank approved specific support to the country through a US$50 million Disaster Risk Management Policy Operation with a Catastrophe Deferred Draw-Down Option (Cat-DDO). A credit of EUR 10 million in co-financing from AFD was also approved in parallel, which is the first time that the AFD has ever co-financed a Cat-DDO operation. Coincidentally, this operation was approved only a few days after tropical cyclone Belna made landfall in Madagascar.
This operation marks an important step toward enhancing Madagascar’s ability to prepare for and respond to natural disasters. Not only does this new funding provide needed additional contingent resources to ensure appropriate post-disaster response, it also offers the country an opportunity to strengthen legal, policy, and other institutional aspects of its Disaster Risk Management (DRM) framework. Specifically, the Cat-DDO financing mechanism will support Madagascar on key reforms that will strengthen the country’s DRM capacities, build its financial resilience to disasters, ensure shock-responsive social protection, and mainstream disaster and climate resilience in its urban development agenda. In addition, it will enable Madagascar to further strengthen its institutional framework and coordination mechanisms to advance its national disaster and climate resilience agenda. Madagascar will therefore be well-positioned to continue its transition from a focus on post-disaster relief operations to proactive DRM measures to increase resilience.
The new Cat-DDO builds on GFDRR’s longstanding engagement in Madagascar, encompassing both regional and national projects. The approval of the operation was preceded by technical collaboration between the Government of Madagascar, AFD and the World Bank on the scope and materialization of this important operation. This was made possible with the support of the EU-funded Africa Disaster Risk Financing (ADRF) Initiative, which funded key activities to facilitate this new operation, including the review of legal forms for establishing such an operation required under Madagascar’s legal framework, as well as technical assistance in view of the adoption a decree establishing a disaster reserve fund. The Cat-DDO operation in Madagascar is only the latest example of how the ADRF Initiative’s activities have laid the groundwork for further investments in risk financing in Sub-Saharan Africa. Previously, the initiative had leveraged over US$ 570 million of additional funding from development partners, including the World Bank, in 6 other countries: Cabo Verde, Kenya, Malawi, Mozambique, Niger and Uganda.
The ADRF Initiative is one of five Result Areas of the European Union (EU) - Africa, Caribbean and Pacific (ACP) cooperation program Building Disaster Resilience in Sub-Saharan Africa, which is implemented by several partners, including the African Development Bank (AfDB), African Union Commission (AUC), the United Nations Office for Disaster Risk Reduction (UNDRR) and the World Bank (WB)-managed Global Facility for Disaster Reduction and Recovery (GFDRR). The Program’s overall objective is to strengthen the resilience of Sub-Saharan African regions, countries and communities to the impacts of natural disasters, including the potential impact of climate change, to reduce poverty and promote sustainable development.
The ADRF Initiative, launched in 2015 and implemented by GFDRR and the World Bank, supports the development of risk financing strategies at regional, national and local levels to help African countries make informed decisions to improve post-disaster financial response capacity in order to mitigate the socio-economic, fiscal and financial impacts of disasters.