THE World Bank (WB) has urged the Zimbabwean government to establish a dedicated disaster response fund to consolidate fragmented disaster response mechanisms and plans to respond to climate change.
Zimbabwe has often found itself unprepared during unexpected climate change-induced disasters, resulting in the government reallocating existing budgets and international aid to deal with those challenges.
In its Zimbabwe Economic Update report, the bank said if established, the proposed fund could also be used to channel payouts from the Africa Risk Capacity (ARC) and other bilateral sources to disaster response funding.
“The absence of a dedicated funding mechanism for disaster response is a recognised shortcoming. Disaster risk financing for climate shocks and other natural disasters is mainly financed through ex-post budgetary reallocations and international development partners,” World Bank said.
“While Zimbabwe has a general contingency budget for unforeseen expenditures, including those from weather and climate shocks, budget reallocations that draw on unutilised funds from non-performing capital projects are the main source of disaster risk financing.”
The bank said while Zimbabwe had a general contingency budget for unforeseen expenditures, including weather and climate shocks, this was not enough.
“Zimbabwe also has a range of funds that either explicitly serve as contingency reserves or are routinely used to respond to climate shocks. Most of the funds are hosted at line ministries or departments and are used as back-up funds for specific contingencies that affect them,” the World Bank said.
“Reallocations within votes are easy to make and can be mandated by the relevant minister. Reallocations between votes require parliamentary or presidential approval and are also regularly used to finance disaster response.
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“Zimbabwe’s efforts to tap into disaster risk finance are modest and inadequate to cover potential losses and risks faced by the country.”
The bank added that the government remained exposed to significant and increasing flood and storm risks, as there was currently no insurance for public assets and critical infrastructure.
“Access to the international insurance market is through the African Risk Capacity from which the GoZ [government of Zimbabwe] first took out a national drought insurance policy in 2019 and, since then, continues to purchase cover, although due to financial constraints the amount of coverage purchased declined sharply in 2022,” the World Bank said.
“In 2020, Zimbabwe received a payout of US$1,4 million from its drought policy, benefiting over 155 000 people through direct cash transfers. The policy is designed to cover losses of about US$130 million or at least 3,5 million people.
“However, due to the limited ability of the GoZ to pay premiums, the ceding percentage has remained low (under 10%) and, in 2022, dropped sharply to 1,74%, which only covers 42 000 people (World Bank, 2024).”
The bank said the use of domestic insurance was severely constrained by macroeconomic volatility.
“As a result, Zimbabwe is still heavily dependent on international aid, especially to respond to its persistent food insecurity. Following the 2023/24 drought, ARC paid out US$32 million, with the government receiving US$16 million,” the World Bank said.
“Overall, the GoZ’s risk financing instruments are inadequate for the scale of losses and the range of perils that Zimbabwe faces. Furthermore, the use of domestic insurance is severely constrained by macroeconomic volatility.
“As such, there is a substantial gap between available prearranged disaster and climate risk funds, and the average annual cost of disaster response.”
In addition, the bank said the government could further strengthen early warning systems in the medium-term by setting up a dedicated disaster response fund and scaling-up access to regional disaster risk finance.
“A dedicated ‘Zimbabwe Disaster Response Fund’ could consolidate the fragmented disaster response mechanisms hosted by line ministries and improve response coordination,” the World Bank said.
“The Fund could also be used to channel and coordinate the pay-outs from scaled-up cover purchased through the African Risk Capacity, as well other bilateral sources of disaster response funding.”
