CATASTROPHE DEFERRED DRAWDOWN OPTION (DPL with DDO)

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This program document proposes a US$102 million Disaster Risk Management, or DRM Development Policy Loan with a Catastrophe Deferred Drawdown Option (CAT-DDO) as budget financing for the Government of Sri Lanka, or GoSL for an initial period of three years. In parallel, a fiscal disaster risk assessment is ongoing5, which will provide a clearer indication of the annual expected loss and probable maximum loss faced by the Government. The development objective of the operation is to enhance the capacity of the GoSL to be more resilient to the impacts of natural disasters. It will achieve this by providing immediate liquidity to the GoSL in the event of a disaster within a policy framework designed to improve the overall capacity of the GoSL to implement its DRM program. The DPL with a CAT-DDO will be delivered in FY14, alongside the US$110 million Improving Climate Resilience Project. The DPL with a CAT-DDO will increase fiscal resilience in the short term through a line of credit to be used in case of a disaster, and associated technical assistance (TA). The Improving Climate Resilience Project will provide support to the GoSL through a first phase of short-term investments to build physical resilience to climate-related hazards. Both operations will be presented to the Board as a holistic package.