ECONOMYNEXT- Disasters are annually costing Sri Lanka 50 billion rupees, or around 0.4 percent of gross domestic product (GDP) in damages, which requires preventive measures to reduce climate risks, the World Bank said in a report.
“On average, Sri Lanka experiences LKR 50 billion (US$313 million) in annual disaster losses related to housing, infrastructure, agriculture, and relief,” the report titled “Contingent Liabilities from Natural Disasters: Sri Lanka” said.
Around 32 billion rupees of damages are from floods. Cyclones and high winds cause 11 billion rupees in losses, while droughts and landslides cause 5.2 billion rupees and 1.8 billion rupees in damages respectively.
Disasters are costly on human lives as well, with the 2017 floods leading to 213 passing away and the 2018 floods leaving another 13 persons dead.
The state provides the thousands who become homeless 1.2 million rupees each to build a house and 0.4 million rupees each to procure land or settle on state-owned land.
Sri Lanka is one of the world’s most at-risk for climate-related disasters. The country was ranked second most affected by extreme weather events over the past 20 years in the Global Climate Risk Index.
The disasters disproportionately affect the poor, with 77 percent of the population in areas highly vulnerable to floods and droughts employed as smallholder farmers, the World Bank said.
This also disrupts Sri Lanka’s protected rice production.
In Decemer 2017, food inflation rose to 14.4 percent due to disruptions to agricultural supply chains from droughts.
Tea, rubber and coconuts, key export crops, also face reduced production as they are in areas which experience high rainfall and long dry spells, the World Bank said.
Droughts also force the state to switch electricity production from cheap hydropower to expensive thermal, which cost 560 million US dollars in higher oil import costs in 2017, worth around 0.7 percent of GDP.
Industrial activity is not beyond disruptions as well. Lion Brewery, one of the country’s largest tax payers, had to halt operations in 2016 due to flooding.
The report said Sri Lanka is prone to low frequency of high impact events such as the tsunami or high frequency of low-impact events such as floods.
The World Bank estimates disaster-related liabilities for the government on average at 11 billion rupees a year, or 1 percent of government expenditure.
Contingent liabilities are on average 20.5 billion rupees, after rising to 25 billion rupees in 2018, from 6 billion rupees in 2015.
Contingent liabilities are mainly for rehabilitating infrastructure and public assets. At a smaller scale, the state incurs contingent liabilities for relief payments, resettlement and premiums for disaster insurance.
However, these levels of contingent liabilities could be understated, as multiple agencies are responsible for post-disaster activities, the World Bank said.
When disasters strike, the government has to halt capital expenditure projects and reallocate funds to respond to emergencies and rehabilitate communities, the World Bank said.
Some ministries, such as Disaster Management, Irrigation, and City Planning and Water Supply have dedicated budgets for relief, but other ministries, such as Education, have to be reallocated funds from other ministries, or through passing of supplementary budgets, to rehabilitate schools.
The World Bank recommended preventive measures such as investment in disaster mitigation and climate-proofing public investment projects. Greater co-ordination between ministries was also recommended to improve preventive measures.
Financially, the government was asked to enhance risk management capacities at the ministry of finance, maintain dedicated budget lines to prevent spending cuts for other programs and transfer risks through insurance.
As Sri Lankan is facing tight fiscal space, disasters add greater strain to the Treasury, the World Bank said.
The multilateral lender said the World Bank–Global Facility for Disaster Reduction and Recovery (GFDRR) Disaster Risk Financing and Insurance Program is collaborating with the government to define, assess, and quantify the costs of disasters to the state.
“Increased understanding and accurate quantification of post-disaster liabilities will help the government make informed decisions about how to best to manage these liabilities.”
If the risks are properly assessed, the government could better secure financing, monitor funding and reduce financial risks arising from disasters, the World Bank said. (Colombo/Jan22/2020)