When Hurricane Maria hit Dominica in 2017, it destroyed over 90 percent of the country’s infrastructure. Electricity and communications networks were down for months. Losses and damage amounted to 226 percent of Dominica’s GDP.
The staff at the Ministry of Finance later reported that their public financial management (PFM) practices—while appropriate during normal operating times—were ill-suited for disasters. Standard control processes were at odds with the need to expedite spending. The lack of complete and accurate records—vehicles, equipment, buildings—made it challenging to determine what assets had been lost or damaged, and what the cost implications were. Lack of an adequate mechanism for funding disasters—whether from reserves or insurance programs—delayed the emergency response.
To understand how countries can better prepare for, respond to, and recover from disasters, we identified the following eight aspects in an assessment to help improve the governments’ capacity to manage disaster-related risks and sustain PFM functions afterward (see the figure below).
Have the appropriate institutional arrangements in place: While natural hazards are unavoidable, appropriate regulatory and institutional arrangements for disaster resilient and responsive PFM (DRR-PFM) can help mitigate their impacts. Close collaboration between central finance and national disaster management agencies ensures adequate, effective, and inclusive preparation for, response to, and recovery from disasters.
Building resilient information systems and records: PFM institutions can prepare information systems and digital records to respond to and continue to operate following disasters. Having robust backup routines and adequate arrangements for the continuity of data centers are critical to improved disaster resilience.
Planning and budgeting: Ministries of finance should proactively assess risks and help ensure that funding mechanisms are available to address the foreseeable impacts of disaster events. Effective planning and budgeting can reduce the exposure of people and assets to disasters and improve resilience.
Arrange for disaster-informed asset management: Project design, physical placement, and construction should consider vulnerability to natural hazards using projections of the frequency and intensity of extreme weather events over the assets’ intended lifetime. Countries can use a variety of arrangements to monitor physical assets, including employing geo-referenced platforms as a tool for disaster risk management.
Ensuring transparency and accountability: When disasters strike, governments have to act expeditiously to provide relief for affected populations and restore services. However, urgency is not incompatible with adequate control and accountability. Governments should demonstrate that funds are allocated fairly and support those most in need.
Preparing procurement plans ahead of time: Governments can prepare procurement plans during normal operating conditions to be ready when disasters hit. This includes market research, sourcing strategies, framework agreements, and memoranda of understanding. Governments can also use expedited procurement procedures and training programs to be effectively implemented when needed.
Implement disaster-responsive audit and oversight: The Supreme Audit Institutions, the legislature, and the public all have a role to play in examining disaster-related expenditures to ensure compliance with legislation and regulations and discourage fraud, waste, and abuse.
Be inclusive: Governments can identify the needs of different segments of the population and address these needs in plans, budgets, and program implementation in response to disasters. Collection and analysis of disaggregated data plays a key role in understanding social inclusion gaps and informing the policy design.
The DRR-PFM Assessment focuses on rapid-onset disasters caused by natural hazards (see the figure below). The frequency and severity of meteorological and hydrological hazards will likely increase over time as a result of climate change. However, elements of the DRR-PFM Assessment are also relevant for building institutional resilience and responsiveness for epidemics.
Ministries of finance have a unique role in helping governments anticipate and manage disaster risks. By putting in place policies and procedures early on that can be activated in the event of a disaster, ministries of finance help governments be more resilient and better able to withstand the fiscal and social impacts that may arise. As weather-related disasters increase in intensity and frequency, the time is now to invest in resilient, responsive, and inclusive PFM.
Senior Public Sector Management Specialist
Public Sector Specialist