Third Guatemala Development Policy Loan for Disaster Risk Management with a Catastrophe Deferred Drawdown Option (CAT DDO)

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The development objective of the Third Disaster Risk Management (DRM) Development Policy Loan with a Catastrophe Deferred Drawdown Option (CAT DDO) Project for Guatemala is to support the Government of Guatemala (GoG) in: (i) strengthening the institutional capacity for inclusive DRM and climate change adaptation (CCA), including financial support for vulnerable groups; and (ii) mainstreaming DRM and CCA in selected sectors. It builds on the successes and lessons learned from two previous CAT DDOs, approved in 2009 and 2019, and over 15 years of partnership between the GoG and the World Bank on disaster and climate risk management. this operation is expected to be a key component of the GoG’s disaster risk financing strategy (DRFS), serving as one of the few and preferred instruments available to the government for emergency response. It will enable rapid resource mobilization after extreme natural events, thereby mitigating budget shocks, facilitating recovery processes, and fostering macro-fiscal stability. Additionally, this operation will enhance the DRM policy framework by promoting the adoption of a multisectoral approach that devolves DRM and CCA responsibilities to line ministries and relevant sectoral agencies. The policy reform supported by this CAT DDO will also expand the country’s social protection (SP) system to better safeguard vulnerable households against hazards and sudden income loss and improve their capacity to manage risks.