Disaster Risk Management and Fiscal Policy

This paper addresses the question
whether and how co-benefits, through disaster resilience
building, can be further promoted. Co-benefits are defined
as positive externalities that arise deliberately as a
result of a joint strategy that pursues several objectives
synergistically at the same time, such as disaster risk
management and development goals, or disaster risk
management and climate change adaptation. Of particular
interest is the question of how the economic and broader
benefits of disaster risk management can be recognized and
realized by those in charge of fiscal policy decisions. The
paper considers the interplay between public disaster risk
management investment and fiscal policy, and provides an
overview of the current debate as well as assessment
methods, tools, and policy options. In fiscal budgeting, it
has been standard practice to focus on direct liabilities
and recurrent spending. Costs of disasters are often dealt
with after the fact only, rather than being considered as
contingent liabilities. As a consequence, the full costs of
disasters have often not been budgeted for, and, with a
price signal missing, there is lack of clear incentives for
investing in disaster risk management. Overall, the paper
identifies four steps and three dividends to be harnessed:
(i) understanding fiscal risk; (ii) protecting public
finance through risk financing instruments, the first
dividend; (iii) managing disaster risk comprehensively, the
second dividend; and (iv) pursuing a synergistic,
co-benefits strategy of concurrently managing disaster risks
and promoting development, the third dividend.