Thukten Zangpo

The World Bank has approved a USD 40 million grant to help Bhutan to strengthen its institutional and technical capacity to manage the increasing risks of climate change and natural disasters.

The Climate and Disaster Resilience Development Policy Financing with a Catastrophe Deferred Drawdown Option will help strengthen institutions to safeguard critical infrastructures, including new hydropower projects and buildings as well as strengthening early warning systems and financial resilience of communities.

Contingent financing through the Catastrophe Deferred Drawdown Option would also provide access to immediate liquidity in the event of an eligible catastrophic event, helping the government respond quickly to emergency needs.

Finance Minister Lekey Dorji said, “This operation will significantly contribute to realizing Bhutan’s 13th Plan, which aims to safeguard and strengthen the country’s resilience by focusing on mitigating and managing disaster risks to its economy, infrastructure, institutions, and people. It will provide us with the necessary financial protection and immediate liquidity in the aftermath of disasters, ensuring that we can respond swiftly and effectively to protect our people and infrastructure.”

At the same time, the WB’s Country Director for Bhutan, Abdoulaye Seek, said, “Bhutan is among the most vulnerable countries to natural disasters, or a health emergency caused by a biological event.”

This operation will support safeguarding the hydropower sector, the country’s economic backbone, from natural disaster and climate risks by mandating a catchment-wide approach for all new hydropower projects to increase resilience at every stage of development.

Bhutan has already revised the Guidelines for Development of Hydropower Projects and Dam Safety Guidelines for Hydropower ensuring integrated dam safety and geohazard management.

In addition, it will increase resiliency of critical buildings, including housing, health, and education, in all twenty dzongkhags. Bhutan has adopted and published online the revised Bhutan Building Regulation 2023 that strengthens relevant codes and guidelines for low-carbon and resilient buildings.

Moreover, the operation will support enhancing resilience through mandating adherence of new structures to the Thimphu Design Code and complying with mandatory geohazard and flood resilience measures in hazard-prone areas in Thimphu. Thimphu has the highest population density and vulnerability to various natural hazards including earthquakes, landslides, floods, and wildfires.

World Bank’s Senior Disaster Risk Management Specialist and Task Team Leader of the Operation, Naho Shibuya, said, “The financing will help strengthen the government’s early warning systems for natural hazards such as glacial lake outburst floods and the mitigation of wildfire risks. Furthermore, the operation aims to improve the country’s financial system resilience and the accuracy of disaster risk insurance through adoption of international valuation standards for properties.”

The financing includes a Climate Resilient Debt Clause, which provides an option to Bhutan to defer principal and or service charges for up to two years in the event of an eligible natural disaster including earthquakes, droughts, floods, and health emergencies like pandemics.

This operation is supported by technical assistance from the Climate Investment Funds and GLobal Facility for Disaster RIsk Reduction and Recovery, including the Japan-World Bank Programme for Mainstreaming Disaster Risk Management in Developing Countries.