REPUBLIC OF KENYA THE NATIONAL TREASURY AND MINISTRY OF PLANNING

Transcription

1 REPUBLIC OF KENYA THE NATIONAL TREASURY AND MINISTRY OF PLANNING DISASTER RISK FINANCIAL INSTRUMENTS IN KENYA EXECUTIVE SEMINAR ON INDEX BASED LIVESTOCK INSURANCE SAROVA WHITESANDS HOTEL 19 TH -20 TH APRIL, 2018 ISABEL JOY OCHIENG ECONOMIST

2 Outline Global Overview of Disaster Losses Hazards that Kenya is pre-disposed to Government Post Disaster Expenditure Challenges of Humanitarian Assistance and Budget Re-allocations Pillars of Disaster Risk Management Disaster Risk Financing Strategy for the Republic of Kenya

3 Global Overview of Disaster Losses Disaster losses have essentially tripled in 30 years Insured amounts increased, but are still part of total losses 2,275,000 cumulative fatalities US$3.5 trillion in cumulative economic losses

4 Natural Hazards in Kenya DROUGHTS FLOODS EARTHQUAKES LANDSLIDES VOLCANIC ACTIVITY

5 GoK Disaster Response Expenditure From 2004/05 to 2010/11, GoK spent at least an average of USD million per year on post-disaster assistance. NDMA data suggests that this figure could even be higher, at USD 188 million. USD 600,000,000 USD 500,000,000 USD 400,000,000 USD 300,000,000 USD 200,000,000 USD 100,000,000 USD / / / / / / / / / / /13 NDMA data Susan Mwende, 2012 Author's Analysis of WBG BOOST Initiative data Source: NDMA, as quoted by IFRC, 2015; Mwende, 2012; WBG BOOST Initiative; author s analysis

6 Humanitarian Assistance International donors provide humanitarian aid every year, but gaps between appeals and commitments are growing Source: UN OCHA FTS; WBG BOOST Initiative; Author s analysis

7 Challenges of Humanitarian Assistance and Budget Reallocations Humanitarian assistance tends to be subject to delays, unpredictability, and cost-inefficiencies. It is difficult to get enough funds to address disaster issues through reallocations because the provisions for reallocation of appropriated funds are stringent as per the PFMA 2012.

8 INSTITUTIONAL, POLITICAL, NORMATIVE, & FINANCIAL CONTEXT Pillars of a DRM Framework PILLAR 1: RISK IDENTIFICATION Risk assessments and risk communication PILLAR 2: RISK REDUCTION Structural and non-structural measures; e.g. Infrastructure, land use planning, policies & regulations. PILLAR 3: PREPAREDNESS Early Warning Systems; support of emergency measures; contingency planning. PILLAR 4: FINANCIAL PROTECTION Accessing and reducing contingent liabilities; budget appropriation and execution; ex-ante/ex-post instruments DRFIs PILLAR 5: RESILIENT RECONSTRUCTION Resilient recovery and reconstruction policies; ex-ante design of institutional structures

9 Disaster Risk Financing Strategy for the Republic of Kenya

10 Introduction Vision 2030 identifies risk reduction as a priority for the government. Disaster risk financing complements risk reduction and resilience measures by helping the government address risks that cannot be mitigated (residual risks). Proactive approach focused on planning financial responses in advance to better manage the cost of disasters, ensure predictable and timely access to needed resources, and ultimately mitigate longterm fiscal impacts. DRF Strategy is an important step to enable the government to improve its response to the impact of natural disasters and improve efficiency and effectiveness of budget allocation and execution

11 Background Development of the strategy was through a collaborative process Two inter-governmental workshops led by NT (Oct 2017, March 2018) Multiple stakeholders from GoK -National Disaster Operations Centre -National Disaster Management Unit -National Disaster Management Authority -Council of Governors -State Department of Planning -State Department of Livestock -State of Housing and Urban Development -National Construction Authority With Technical and Financial Assistance from the World Bank.

12 Kenya leading the way Kenya will be the first country in Africa with a DRF strategy First IDA Cat DDO

13 The DRF Strategy 1 OBJECTIVE To increase the ability of the National and County Governments to respond effectively to disasters, thereby protecting development goals, fiscal stability and wellbeing of its citizens. 4 STRATEGIC PRIORITIES 2 OVERARCHING DEVELOPMENT GOALS 1. Ensure a coordinated approach to disaster risk financing across National and County Government institutions managing various disaster risk financing instruments; 2. Improve sovereign financing capacity by strengthening and expanding the National and County Government s portfolio of disaster risk financing instruments; 3. Support key programmes to protect the most vulnerable populations from the impacts of disasters and contribute to building resilience; and 4. Enhance the capacity to respond to disasters of national Ministries, Departments and Agencies, as well as County Governments. in support of 1. Sustaining economic growth and to protect economic gains from disaster shocks 2. Reducing the economic impact of disasters on the poorest and most vulnerable people

14 The DRF Strategy Forward Acknowledgment Executive Summary Chapter 1: Introduction Background Types of disasters and their impacts in Kenya Economic and fiscal impacts of disaster risks in Kenya Legal and institutional framework informing the Disaster Risk Financing Strategy Disaster Risk Financing as Part of a Comprehensive Disaster Risk Management Framework Goal and Strategic Priorities of the DRFS Chapter 2: Disaster Risk Financing in Kenya The role of the National Treasury in disaster risk financing Existing Disaster Risk Financing Instruments Analysis of the existing DRF instruments Chapter 3: Strategic Priorities Going Forward Chapter 4: Implementation, Monitoring, Evaluation and Review

15 Instrument Contingencies Fund Description National level fund to respond to emergencies Active Status (as of Feb 18) Hazards covered All disasters Reserves funds Max. annual value Ksh 10B capped by Constitution 2010 but can vary based on draw down and demand as per the PFMA, 2012 Population/ Geographical coverage Entire country as determined by the GoK Administrator National Treasury County Emergency Funds County-level funds to respond to emergencies Active [19 Counties as of FY 15/16] All disasters Not exceeding 2% of total revenue, PFMA counties as at 2015/16 Financial year County governments National Drought Emergency Fund KLIP KAIRMP Scalable Component of Hunger Safety Net Program (HSNP) WB DPC with a Cat DDO National emergency fund to finance preparedness and response activities during drought. Not Active Drought Initial capital of KSh2Bn appropriated in FY 16/17 - no prescribed maximum Disaster response programmes (Agricultural insurance/shock-responsive safety net) Fully subsidized index insurance for selected pastoralists in ASALs. (Partially Active Drought US$ 13.5 Million subsidized cover to follow) National Area Yield Index Insurance Scheme for maize and wheat farmers Component of cash transfer program allowing to reach up to 272,450 additional HHs during drought. Contingent line of credit Active Active Not Active Multiple peril loss of yield protection US$ 5.13 mln (during first year 2016) 10 US$ 63 mln Contingent financing Natural disasters US$ 200 mln (TBC) 23 ASAL counties (approx. 15 million people) 14,500 beneficiaries in 6 counties (to be expanded to 20,000 pastoralists in 8 Counties in 2018) counties + Acre/IAF portfolio of about 200,000 small maize farmers Turkana, Marsabit, Wajir and Mandera counties (up to 368,000 households) Entire country as determined by the GoK NT, NDMA, county governments and development partners MALF, SDL, NT, Insurance Regulatory Authority, Insurance Industry, Counties SDA-MALF, NT, ACRE Africa, 7 Pool Co-insurers, GoK County Governments, NDMA, DFID, EU National Treasury, WBG African Risk Capacity Humanitarian assistance National level drought insurance to finance relief efforts Contribution from international donors to respond to disaster emergencies Under review Ad hoc Drought Sovereign insurance US$ 60 mln Ex-post humanitarian assistance Natural disasters and humanitarian US$ 267 mln/yr on average ( ) N.A. emergencies 23 ASAL counties (approx. 15 million people) National Treasury, NDMA, ARC GoK, donors, UN system

16 Strategic priority 1: Ensure a coordinated approach across National and County Government institutions managing various disaster risk financing instruments To support this strategic priority, National Treasury will: i. Restructure and strengthen the current Inter-Governmental Committee on drought and food security to enhance coordination and harmonization among existing risk financing instruments and explore the incorporation of other hazards. This will require reviewing of existing legislation. ii. Build on the existing Single Registry and vulnerability baselines to improve targeting of beneficiaries of key risk financing instruments and programs and increase coordination iii. Commission regular reviews of the indices and triggers used by different government programs (ARC, KLIP, HSNP, etc) to ensure alignment and harmonization across programs operating in the same geographic locations. iv. Invest in strengthening institutional capacity to quantify, monitor and manage contingent liabilities, including those related to disaster impacts, as part of its fiscal risk management function including an Integrated Early warning system.

17 Strategic priority 2: Improve financing capacity by strengthening and expanding the government s portfolio of disaster risk financing instruments i. Contingencies Fund (CF): The National Treasury will review allocations to the CF and expenditures made from the CF to assess whether its functions should be strengthened ii. iii. iv. County Emergency Funds (CEF): 19 County Governments currently have set CEFs. Given that Counties are first responders to disasters, the GOK will support County governments in the establishment and operationalization of CEFs National Drought Emergency Fund: The National Treasury and NDMA will operationalize the National Drought Emergency Fund, which was established by the National Drought Management Authority Act of 2016 and was capitalized with KShs2 Billion during FY 2016/2017. Its regulations are pending Cabinet approval. Sovereign risk transfer: National Treasury will convene the Inter-Governmental Committee on drought and food security to review the experience with ARC so far and discuss a potential way forward. Working with KFSSG and the Insurance Regulatory Authority, the Committee would review customisation of Africa RiskView and risk transfer parameters, as well the operations plan for implementation of a possible payout. The Committee would also support NDMA in its ongoing discussions with ARC Ltd about structuring a new insurance product to provide coverage for HSNP, using similar triggers to those used for HSNP scale ups. v. Contingent financing: National Treasury will work to set up a contingent credit line with the World Bank through a Development Policy Credit with a Catastrophe Deferred Drawdown Option (Cat DDO). The credit will enable GoK to access financial resources in the event of a declaration of a state of emergency arising out of a natural disaster. vi. The GoK will explore financing instruments to enhance preparedness for localized, small-scale floods and other non-drought emergencies. For large scale events, GoK will be able to activate the proposed Cat DDO (once active) and small-scale droughts will be addressed with resources from the NDEF (once operational). However, smaller scale non-drought events largely remain without coverage.

18 Strategic priority 3: Support key programmes to protect the most vulnerable populations i. HSNP: Thorough review of the modality in which HSNP scalability is implemented. A review of the existing triggering mechanism will be carried out as part of the Kenya Social and Economic Inclusion Project, under preparation with the World Bank. ii. iii. iv. A targeted review of financing options to support HSNP scalability will also be necessary. This review, to be led by NDMA with the support of National Treasury and the Inter-Governmental Committee on drought and food security, will contribute to improving coordination among different instruments in the GoK s risk financing portfolio.. KLIP: To sustainably expand the program, ensure fairness in allocation of resources, and avoid overlaps with other programs (including HSNP), KLIP will need to start using an electronic identification system, i.e. the existing Single Registry (see strategic priority 1). Promoting the financial sustainability of the program will require ensuring continuity and predictability of national government support to cover premium subsidies. SDL should request a multi-year budget allocation from the National Treasury to support the implementation and future expansion of the program. SDL should also ramp up plans to launch the planned voluntary component (i.e. not 100% subsidized) of KLIP. Kenya Agricultural and Insurance Management Programme: GoK will expand the geographical coverage as well as anchoring KAIRMP into a legislative framework to ensure its sustainability. Coordination with humanitarian and NGO sectors: The humanitarian sector plays a key role in the financing and implementation of disaster response in Kenya. To ensure these resources are delivered in a manner in line with GoK s disaster response plans, the National Treasury will support the coordination of disaster response by convening humanitarian and development partners.

19 Strategic priority 4: Enhance capacity and raise awareness in MDAs and County Governments on the need to strengthen disaster preparedness and response capacity i. Empower National and County Governments in their ability to effectively respond to disaster shocks, by: ii. Clarifying the responsibility of county governments for post-disaster expenditure (i.e. what is the responsibility of the national government and what is the responsibility of county governments). Clarifying this division of responsibility in advance would help National Treasury better manage disaster-related contingent liabilities, create incentives for proactive risk reduction by county governments, and generally improve transparency and discipline in post-disaster spending. Promoting targeted capacity building, including sensitization on the importance of establishing County Emergency Funds. Awareness creation of the roles and purpose of DRF instruments. Defining guidelines for the establishment and operation of County Emergency Funds and related technical support. Capacity building on technical aspects and modelling of DRF instruments to ensure proper understanding and effectiveness in addressing the needs of the country

20 Thank You