Palau and Asian Development Bank signed a $15-million-dollar pre-approved loan or credit line for disaster relief on Wednesday, October 17, 2018.

The type of funding is another means that Asian Development Bank can deliver assistance for climate change induced disasters efficiently and effectively, according to Ms. Ananya Basu of the ADB during a plenary session on Mobilizing Resources and Securing Funding through Innovation and Diverse Forms of Financing Mechanism for Island Communities building resilience against current and future impacts of climate change.

The fund is basically a pre-approved line of credit that is triggered only by a disaster and a declaration of the State of Emergency.  There is no limit as to the amount of the drawdown as long as it’s within the pre-approved amount.

“The draw down time once the request is put in on this type of financing can be only within 24 hours and the funds would be in the government account,” added Ms. Basu.  This quick response helps to quickly mitigate certain impacts of disasters that occurs after the initial disaster hits.

The funds remains with ADB and will only be drawn as those specific criteria are triggered such as a disaster occurring and State of Emergency declared. Palau will not be paying anything unless it draws down the money.  It is essentially a pre-approved credit line for disaster relief or a type of insurance for disaster relief.

Palau had established a reserve fund within the budget process in the 9th OEK as funds to be used in case of disaster.  Creation of such fund reserve came at the right time as Palau experienced two super-typoons back to back and the worst recorded drought right after the two typhoons.  Those funds mitigated the impact of the three major natural disasters but was starting to strain the government before Palau came out of the drought.  The second extension of the State of Emergency was denied by Senate as the cost of that disaster continued to increase.

This type of financing mechanism can serve as resource for addressing future disasters without straining Palau’s financial resources, especially, with more frequest and severe natural disasters predicted for the coming years as result of climate change. (L.N. Reklai)