The Independent State of Papua New Guinea: Growth and Resilience Climate Policy-Based Financing (CPBF) with a Catastrophe Deferred Drawdown Option (Cat-DDO)

proposed

This operation is a Climate Policy-Based Financing (CPBF) program structured as a parallel co-financing with the World Bank. The World Bank's operation is organized around three reform areas: (i) fiscal sustainability; (ii) trade facilitation and market access; and (iii) climate, disaster, and health resilience. AIIB's support will primarily focus on the second and third reform areas, with the possibility of including selected climate-relevant policy actions where consistent with the CPBF policy. The operation includes a Catastrophe Deferred Drawdown Option (Cat-DDO) to provide rapid liquidity upon declaration of a state of emergency, strengthening Papua New Guinea's disaster risk financing architecture and reducing fiscal volatility during crises. Indicative policy actions under the second reform area include the Biosecurity Bill and the National Trade Information System. Actions under the third reform area include the Fire and Rescue Service Bill, the National Internally Displaced Persons Policy, and the National Health ICT Policy. As a fragile and climate-vulnerable state, Papua New Guinea faces high exposure to both natural hazards and public health emergencies. The country ranks among the most disaster-prone globally, with average annual disaster losses estimated at 1.6 percent of GDP. Climate change is intensifying these risks and compounding fiscal pressures. The Government has therefore requested AIIB's support to strengthen institutional and financial resilience to climate, disaster, and health-related shocks through a CPBF operation that also advances a pathway for scaling future climate-related investments. Institutional coordination is anchored in a dual structure in which the Climate Change and Development Authority (CCDA) provides climate policy leadership and alignment with national frameworks, while the Ministry of Treasury ensures fiscal integration and cross-ministerial implementation.