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Policy-based financing that is focused on resilience building and on planning for the unforeseen plays an important role in strengthening a state’s capacity to deal with shocks. Political scientist, Francis Fukuyama recently argued in Foreign Affairs that it takes a state to effectively deal with the COVID-19 crisis. Unfortunately, developing countries—arguably by definition—often lack effective state institutions such as (financial) risk management and social protection systems. The importance...
The COVID-19 crisis has been a sudden, high-speed reverse gear – quickly eroding gains in economic growth and poverty reduction across the world. The pandemic is still escalating but the pain it is causing in the lives of billions of people is especially evident in the world’s 74 poorest countries supported by the International Development Association (IDA). These are countries where children, women, people living in fragile and conflict-affected situations, and those employed in the informal...
Simply put, we save money as a precaution because we do not know what the future holds. Savings help governments fulfill their fundamental role, which is to ensure the well-being of their citizens. When natural disasters or crises strike, early action saves lives. COVID-19, which has wreaked havoc on economies and taken the lives of people around the world, has proved this yet again. Statistically speaking, COVID-19 has shown that timely action helps flatten the curve (see figure 1). Figure 1...
Several recent articles have discussed how losses from hurricanes in the United States may be exacerbated by COVID-19 . Many of the articles are written from the perspective of insurers and reinsurers; here, though, we consider the negative impact of such losses on the insured in the context of parametric insurance schemes, which several developing countries have implemented within their risk-financing strategies for disaster response. 1. CONTEXT ALWAYS MATTERS FOR CATASTROPHE LOSSES. The same...
COVID-19 has halted the world as we know it. Unfortunately, natural disasters and climate shocks will not stop in its wake. When disasters do strike, they compound the already devastating impacts of COVID-19. After only a few months, COVID-19 has already increased countries’ vulnerability to disasters and has reduced the countries’ capacity for dealing with shocks. It is placing a heavy burden on national health care and social protection systems; it imposes ever-increasing economic exposure in...
We are in the midst of an unprecedented crisis. To date, more than 435,000 people have tragically lost their lives as a result of COVID-19. The June 2020 edition of the World Bank’s Global Economic Prospects report forecasts a 5.2 percent contraction in global GDP in 2020—the deepest global recession since World War II and the broadest collapse in per capita incomes since 1870, thereby tipping millions back into poverty. Such global statistics barely capture the effects on the lives of people...
While the world was focusing on battling the COVID-19 pandemic, the small Pacific island countries of Fiji, the Solomon Islands, Tonga, and Vanuatu were hit by Tropical Cyclone Harold. In Africa, desert locusts have ravaged farms and pastureland in several countries, including Ethiopia, Kenya, and Uganda. These tragic events are a painful reminder that climate change and other natural disasters have not been locked down by the COVID-19 pandemic. Vulnerable countries are especially at risk of...