Nepal receives $150 million contingent financing for disaster response from World Bank

The World Bank has approved $150 million in contingent financing for Nepal to use in natural or climate-induced hazards or health emergencies in the country. 

The bank’s executive board of directors agreed upon the financing on October 8 under the Nepal Disaster Resilience Development Policy Credit with Catastrophe Deferred Drawdown Option (Cat DDO) project. 

Contingent financing refers to conditional financial arrangements (loan, credit line) that are available when specific risks or contingencies arise. For instance, a contingent credit line allows borrowers to access funds quickly in response to unforeseen events — such as a natural disaster or an economic downturn. The contingent financing through the Cat DDO will provide immediate liquidity for the Nepal government in the aftermath of the recent disaster for its response and recovery.

“As the flooding of recent weeks has shown, Nepal is facing a polycrisis of natural and climate-induced hazards and health emergencies, putting the country at ever-increasing risk of serious financial shocks,” said David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka.

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The Cat DDO is an innovative disaster risk financing instrument offered by the International Bank for Reconstruction and Development (IBRD), the World Bank Group’s development bank. It would help the government respond quickly to emergency needs without diverting resources from its ongoing development programs and will complement the government’s existing response mechanisms such as the National Disaster Management Fund and the Prime Minister’s Disaster Relief Fund.

The financing supports Nepal’s disaster resilience by aiding in the improvements in the country’s early warning systems, policies, regulatory frameworks, and institutions for risk reduction and informed investment in critical infrastructure as well as better preparedness for public health emergencies, said the press release.