The Inter-American Development Bank (IDB) approved a loan for $100 million to help Panama reduce its vulnerability to natural disasters and the effects of climate change.
The program is designed to improve risk management, reduce potential economic losses caused by natural events, and strengthen the country’s capacity to adapt to climate change.
Panama could incur losses from natural events equivalent to an estimated 5.4 percent to 9.0 percent of its GDP, according to the Disaster Deficit Index, which analyzes a country’s economic capacity to deal with catastrophic events every 100 years. As such, Panama lacks sufficient resources to cope with significant losses and reconstruct affected infrastructure.
The program includes strengthening the Ministry of Economy and Finance in the development of a financial strategy that includes a reserve fund to cover recurring natural events. The program will also support policy and risk management plans that help improve the indicators that measure the country's performance in this sector.
Panama’s vulnerability to natural events has been increasing as a result of rapid urban growth, infrastructure development in areas at risk, intensive land use changes, and environmental degradation of watersheds. Economically vulnerable sectors such as agriculture and tourism, as well as the Panama Canal watershed, face particularly high risks.
In the last decade, the Panamanian government has declared a state of emergency on eight occasions. The most recent was in December 2010, when heavy and prolonged rains forced the closing of the Panama Canal (for only the fourth time in the canal’s 96 years of operation) and also left much of Panama City without drinking water for several weeks. The IDB approved $20 million in April 2011 to help the country respond to that emergency.
This is the second in a series of three programmatic loans to Panama for a total of approximately $300 million. Financing was extended for a period of 20 years with a grace period of three years and a variable interest rate based on LIBOR.
