Conceptualizing Disaster Risk–Based Budgeting and Exploring Practical Applications

Investment Rating - The report does not explicitly provide an investment rating for the industry discussed Core Insights - The report emphasizes the importance of integrating disaster risk into public financial management (PFM) to enhance fiscal resilience and sustainable development as climate change increases disaster impacts [25][48] - Disaster risk-based budgeting (DRBB) is proposed as a systematic approach to embed disaster risk considerations throughout the government budget cycle, addressing the challenges of inadequate financial planning for disasters [30][59] - The report highlights that effective disaster risk finance (DRF) solutions must be part of daily government activities rather than occasional investments, with a focus on proactive measures rather than reactive responses [25][26] Summary by Sections Introduction - The need for disaster risk-based budgeting is underscored due to the growing macroeconomic and fiscal instability caused by disasters, which have been exacerbated by climate change [44][48] - The report identifies binding constraints on managing public finances for disaster risk, including the perception of disasters as unpredictable events and the preference for known expenditures over contingent liabilities [61][64] Disaster Risk-Based Budgeting Entry Points - DRBB is defined as the consideration of disaster risk throughout the budget cycle, which includes strategic planning, budget preparation, approval, execution, accounting, and audit [78][83] - The report outlines various entry points for integrating disaster risk into the budget cycle, emphasizing the need for comprehensive disaster audits and risk-informed public investment [32][33] Governance of DRBB - Effective governance structures are essential for implementing DRBB, with central finance agencies playing a crucial role in ensuring comprehensive and coordinated disaster risk finance [37][38] - The report suggests that DRBB should not be a one-size-fits-all approach but should be tailored to individual country risk profiles and constraints [38][39] Recommendations and Further Study - The report provides recommendations for improving DRBB practices, including the need for regular reviews of DRF instruments and better integration of disaster risk into routine budgeting processes [59][60] - Areas for further research are identified, particularly in understanding the fiscal impacts of climate-induced disasters and enhancing the effectiveness of DRF instruments [39][60]