BANGKOK: Nepal and the World Bank have signed an agreement to explore the possibility of issuing a catastrophe bond that would help the country access emergency financing following a major earthquake.
The mandate agreement was signed between the Government of Nepal and the International Bank for Reconstruction and Development (IBRD), a member of the World Bank Group. The agreement marks the beginning of a joint assessment of how international capital markets could help Nepal strengthen its financial preparedness for natural disasters.
Nepal is among the countries highly exposed to natural hazards, including earthquakes, floods and landslides. The proposed catastrophe bond could provide an additional source of funding to support the country’s disaster response and recovery efforts when a qualifying disaster occurs.
Under the agreement, the World Bank Group Treasury will work with the Government of Nepal and financial market participants to assess the feasibility of the proposed bond and determine its possible structure.
A catastrophe bond is a financial instrument that allows governments or other entities to transfer specific disaster risks to investors in capital markets. Depending on the terms of the bond and the occurrence of a defined disaster, funds can be made available to help cover emergency response and recovery costs.
The initiative is part of the World Bank Group’s broader catastrophe bond programme, which supports sovereign countries in accessing international capital markets to manage financial risks associated with natural disasters.
For Nepal, the proposed arrangement could complement existing disaster preparedness and risk-reduction measures by strengthening financial protection against major earthquakes. However, the agreement marks the start of a feasibility assessment, and the potential structure and terms of the transaction will depend on the outcome of that process.
FACEBOOK COMMENTS