HR: 14:25h
AN: S23C-03    [Abstracts]
TI: Modeling financial disaster risk management in developing countries
AU: Mechler, R
EM: mechler@iiasa.ac.at
AF: IIASA, Schlossplatz 1, Laxenburg, 2360 Austria
AU: Hochrainer, S
EM: hochrain@iiasa.ac.at
AF: IIASA, Schlossplatz 1, Laxenburg, 2360 Austria
AU: Pflug, G
EM: pflug@iiasa.ac.at
AF: IIASA, Schlossplatz 1, Laxenburg, 2360 Austria
AU: * Linnerooth-Bayer, J
EM: bayer@iiasa.ac.at
AF: IIASA, Schlossplatz 1, Laxenburg, 2360 Austria
AB: The public sector plays a major role in reducing the long-term economic repercussions of disasters by repairing damaged infrastructure and providing financial assistance to households and businesses. If critical infrastructure is not repaired in a timely manner, there can be serious effects on the economy and the livelihoods of the population. The repair of public infrastructure, however, can be a significant drain on public budgets especially in developing and transition countries. Developing country governments frequently lack the liquidity, even including international aid and loans, to fully repair damaged critical public infrastructure or provide sufficient support to households and businesses for their recovery. The earthquake in Gujarat, and other recent cases of government post-disaster liquidity crises, have sounded an alarm, prompting financial development organizations, such as the World Bank, among others, to call for greater attention to reducing financial vulnerability and increasing the resilience of the public sector. This talk reports on a model designed to illustrate the tradeoffs and choices a developing country must make in financially managing the economic risks due to natural disasters. Budgetary resources allocated to pre-disaster risk management strategies, such as loss mitigation measures, a catastrophe reserve fund, insurance and contingent credit arrangements for public assets, reduce the probability of financing gaps - the inability of governments to meet their full obligations in providing relief to private victims and restoring public infrastructure - or prevent the deterioration of the ability to undertake additional borrowing without incurring a debt crisis. The model -which is equipped with a graphical interface - can be a helpful tool for building capacity of policy makers for developing and assessing public financing strategies for disaster risk by indicating the respective costs and consequences of financing alternatives.
DE: 6309 Decision making under uncertainty
SC: Seismology [S]
MN: Fall Meeting 2005