Disaster Risk Management Development Policy Loan with a CAT DDO

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The objective of the Disaster Risk Management Development Policy Loan with a Catastrophe Deferred Drawdown Option (CAT DDO) Program is to enhance the Government of Panamas (GoP's) capacity to implement its Disaster Risk Management (DRM) Program for natural disasters. Panama's vulnerability to the impacts of natural hazards is showing an increasing pattern characterized by a higher physical exposure of people, goods, and services, compounded by extreme climatic variability conditions. This evolving risk scenario was manifested in December 2010, when intensive rainfall across Panama caused widespread flooding, even forcing the temporary closing of the Panama Canal due to the unprecedented water levels in the artificial lakes, reaching their highest levels ever recorded. At the same time, extensive areas of Panama City lacked potable water for weeks due to the associated impacts of the rainfall and flooding. According to a March 2011 official government report, Panama needed an additional US$149.3 million to repair damaged infrastructure and restore economic activity in the areas affected by the floods. The (GoP) did not have enough contingent reserves to finance the post disaster rehabilitation phase and was forced to ask the National Assembly for a temporary suspension of the financial limits contained in the Social and Fiscal Responsibility Law to bridge the financial gap caused by the disaster. This Program Document is a US$66 million loan with a CAT DDO as budget financing for the GoP for an initial period of three years. The GoP requested this operation to complement other instruments in the country that are part of its DRM Program, and are in line with the Bank's comprehensive framework for disaster risk management and emphasis on disaster prevention, as opposed to only disaster response.