World Bank Approves $150M Contingency Credit to Bolster Nepal’s Disaster and Health Emergency Preparedness

The operation is designed to help Nepal improve early warning systems, enhance risk-informed investments, and develop the infrastructure needed to mitigate the impacts of disasters.

The World Bank’s Board of Executive Directors has approved a $150 million contingent credit line to support Nepal in responding to natural disasters, climate-related hazards, and public health emergencies. The Nepal Disaster Resilience Development Policy Credit with Catastrophe Deferred Drawdown Option (Cat DDO) will provide the Nepalese government with immediate access to funds in the event of a disaster, enabling quick and effective responses without disrupting ongoing development programs.

The Cat DDO credit is part of a broader effort to support policy and regulatory reforms aimed at improving Nepal’s disaster resilience and strengthening institutional frameworks for disaster risk reduction and management. The operation is designed to help Nepal improve early warning systems, enhance risk-informed investments, and develop the infrastructure needed to mitigate the impacts of disasters.

Increasing Vulnerability to Climate Hazards and Health Emergencies

Nepal faces significant risks from natural disasters and climate-induced events, including earthquakes, floods, and landslides. The recent flooding in parts of the country underscored Nepal’s vulnerability to a “polycrisis” of natural and climate hazards, compounded by public health emergencies. These crises place growing financial stress on the government, making immediate post-disaster funding a critical need.

“As the recent floods have shown, Nepal is at increasing risk of multiple crises. This credit line will provide a crucial buffer, allowing the government to respond effectively without diverting funds from essential development programs,” said David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka.

Key Areas of Support

The new financing will support several key areas:

Disaster Resilience: Strengthening institutional mechanisms for disaster response across Nepal's three-tiered federal system and enhancing early warning systems.

Risk-Informed Investments: Building regulatory frameworks that promote risk-reduction investments, particularly in critical infrastructure.

Health Emergency Preparedness: Expanding preparedness measures for public health emergencies, enabling swift responses to health crises that may arise.

The contingent financing tool, Cat DDO, offers the Nepalese government flexibility by providing access to immediate liquidity after disasters, while also complementing the country’s existing disaster response mechanisms such as the National Disaster Management Fund and the Prime Minister’s Disaster Relief Fund.

Global Partnerships

This operation is supported by technical assistance and grant funding from global partnerships, including the Global Facility for Disaster Risk Reduction and Recovery (GFDRR) and the Earthquake Housing Reconstruction Multi-Donor Trust Fund. Key international donors contributing to these initiatives include Canada, USAID, the Foreign, Commonwealth and Development Office (FCDO), and the Swiss Agency for Development and Cooperation (SDC).

The World Bank’s support aligns with Nepal’s commitment to strengthening disaster preparedness and resilience in the face of escalating climate risks. This strategic investment ensures that Nepal can better protect its population, infrastructure, and economy from future disasters while maintaining its focus on sustainable development goals.