Report No. 94474-pk fiscal Disaster Risk Assessment Options for Consideration

Chapter 1: Introduction

Historically, a reactive, emergency response approach has been the predominant way of dealing with disasters in Pakistan. To that end, the West Pakistan National Calamities (Prevention and Relief) Act of 1958⁵, which governed disaster risk management activities, was mainly concerned with organizing the emergency response. Following the 2005 earthquake which affected Azad Jammu and Kashmir (AJK), and the Khyber Pakhtunkhwa (KPK) Province (the then North-West Frontier Province, NWFP) it became clear that appropriate policy and institutional arrangements needed to be put in place to mitigate potential losses of life and property from future disasters, while protecting federal and provincial budgets.

The National Disaster Management Ordinance of 2006 established the National Disaster Management Authority (NDMA) as an executive arm of the National Disaster Management Commission (NDMC). The NDMA has been made operational to coordinate and monitor implementation of national policies and strategies on disaster risk management. This new system is designed to devolve and de-centralize the mechanisms for disaster risk management. Provincial Disaster Management Commissions (PDMCs) and Authorities (PDMAs) have been established while similar arrangements have been made in AJK, Northern and the Federally Administered Tribal Areas (FATA), eventually establishing the Sindh Disaster Management Authority (SDMA), the Gilgit Baltistan Disaster Management Authority (GB-DMA) and the FATA Disaster Management Authority (FDMA) respectively. District Disaster Management Authorities (DDMAs) have been set up across the country and are viewed as the linchpins of the whole system, playing the role of the first line of defense in the event of a disaster.

A National Disaster risk Management Framework (NDMF) has been formulated to guide the work of the entire system in the area of disaster risk management. It identifies national strategies and policies for disaster risk management, with nine priority areas highlighted to establish and strengthen policies, institutions and capacities: (i) institutional and legal arrangements for DRM, (ii) hazard and vulnerability assessment, (iii) training, education and awareness, (iv) disaster risk management planning, (v) community and local level programming, (vi) multi-hazard early warning systems, (vii) mainstreaming disaster risk reduction into development, (viii) emergency response systems, and (ix) capacity development for post disaster recovery.

While the necessary legal, institutional and policy measures have been taken by the Government of Pakistan for DRM, there are a number of entities working on DRM with overlapping mandates at the federal level in addition to NDMA. These include the Earthquake Reconstruction & Rehabilitation Authority (ERRA), the Emergency Relief Cell (ERC), and the Federal Flood Commission (FFC), amongst others. This multiplicity of institutions is also present at the provincial level, which include, PDMAs, the Provincial Irrigation Departments (PIDs), and the Civil Defence and Rescue Services. Similarly, in addition to the NDMA Act, there are a number of legal parameters covering disasters and emergency situations that overlap between government agencies and tiers.

The World Bank is providing technical assistance to the GoP for the development of a national disaster risk financing strategy. This non-lending technical assistance aims to: (i) assess the fiscal exposure of the GoP to natural disasters; (ii) propose options for the development of a national strategy to improve financial response capacity for natural disasters; and (iii) promote property catastrophe risk insurance for both public and private dwellings.

Disaster risk financing and insurance (DRFI) is one of the five pillars in the proactive and strategic framework for disaster risk management (DRM) promoted by the World Bank. The World Bank has been promoting a proactive and strategic framework for DRM based on five pillars: (i) risk identification; (ii) risk reduction; (iii) preparedness; (iv) financial protection; and (v) resilient recovery. Despite prevention and mitigation efforts, no country can fully protect itself from the impacts of major natural catastrophes. Disaster risk financing and insurance allows governments to increase their financial response capacity in the aftermath of a disaster, and to improve access for affected populations to financial tools to aid recovery. These financial mechanisms can also reduce the impact of disasters on social and economic development by smoothing financial shocks and preventing governments and populations from resorting to adverse coping mechanisms that disrupt development initiatives and productivity. The types of mechanism that this practice area encompasses are detailed in the table below, along with mechanism beneficiaries.

Table 1. Disaster risk financing and insurance policy areas and benefits