Strategic Framework for the Financial Management of Disaster Risk

Disasters associated with the impact of natural hazards have had adverse social and fiscal effects on Panama over time, and the Government of Panama (GoP) is therefore committed to strengthening the financial management of disaster risks. Actions taken by the GoP in financial management of disaster risk are consistent with law 34 of June 5, 2008, the law on social fiscal responsibility. This law aims to establish norms, principles, and methodologies for consolidating fiscal discipline in national financial management of the public sector, a necessary condition for continuous and sustainable economic growth. The strategic framework was developed with the support of regional and international entities. The document incorporates a number of important lessons learned from international experience: (i) include disaster risks as part of an integrated framework of fiscal risk management; (ii) ensure that governments have access to immediate funds following a disaster; (iii) consider the creation of a national disaster fund; and (iv) reduce the government's contingent liabilities against disasters associated with the impact of natural hazards by insuring critical public assets and promoting the private insurance market for catastrophic risks and agricultural insurance. The strategic framework has the following five strategic pillars: (i) identification, quantification, and understanding of fiscal risk due to disasters; (ii) incorporation of disaster risk analysis in the planning of public investment; (iii) formulation of components for developing and implementing risk retention and transfer instruments; (iv) development of the domestic insurance market; and (v) strengthening of the state directorate of investment, concessions, and risks (DICRE) so it can fulfill its role in designing and implementing financial protection strategies.