The World Bank’s Board of Executive Directors has approved a $40 million financing package aimed at bolstering Bhutan’s ability to manage the growing risks posed by climate change and natural disasters. The initiative, titled Climate and Disaster Resilience Development Policy Financing with a Catastrophe Deferred Drawdown Option, is designed to enhance the country’s institutional and technical capacities to safeguard critical infrastructure and communities.
This financing will support the Royal Government of Bhutan (RGoB) in strengthening its resilience against climate-related hazards and natural disasters, particularly in the hydropower sector, which is vital to the nation’s economy. Key components of the plan include enhancing early warning systems, improving disaster preparedness, and ensuring financial resilience at the community level.
Finance Minister Lekey Dorji said that the initiative aligns with Bhutan’s 13th Five-Year Plan, which prioritizes disaster risk mitigation and strengthening national resilience. “This operation will provide us with necessary financial protection and immediate liquidity following disasters, ensuring that we can respond swiftly to protect our people and infrastructure,” he said.
World Bank Country Director for Bhutan, Abdoulaye Seck highlighted the country’s vulnerability to natural disasters, emphasizing the need to protect critical infrastructure, including the nation’s hydropower projects. “Bhutan is highly reliant on hydropower, which faces significant climate risks. This partnership will help build the capacity needed to protect both infrastructure and communities against the impacts of climate change,” the Director said.
A key feature of the financing package is the inclusion of a Catastrophe Deferred Drawdown Option, which would provide Bhutan with immediate access to liquidity in the event of a natural disaster. This mechanism ensures that the government can respond quickly to emergency needs without delay.
The financing will also support measures to safeguard the hydropower sector through a more resilient approach to infrastructure development. New guidelines for hydropower projects have been revised to integrate geo-hazard management and dam safety. Additionally, the updated Bhutan Building Regulation 2023 mandates stronger resilience for critical buildings, such as housing, schools, and healthcare facilities, across the country’s 20 districts.
Thimphu, which is particularly vulnerable to natural hazards like earthquakes, landslides, floods, and wildfires, will benefit from enhanced building standards and hazard resilience measures. The new Thimphu Design Code will require that all new buildings adhere to stricter geo-hazard and flood resilience standards.
World Bank Senior Disaster Risk Management Specialist Naho Shibuya said that the importance of strengthening Bhutan’s early warning systems for natural hazards such as glacial lake outburst floods and wildfire risks. The initiative will also help improve the accuracy of disaster risk insurance by adopting international property valuation standards.
As part of the financing, a Climate Resilient Debt Clause has been introduced, which allows Bhutan to defer principal and service charges on its debt for up to two years in the event of a natural disaster, drought, flood, or health emergency such as a pandemic.
The initiative is supported by technical assistance from the Climate Investment Funds and the Global Facility for Disaster Risk Reduction and Recovery, as well as the Japan-World Bank Program for Mainstreaming Disaster Risk Management in Developing Countries.
By Nidup Lhamo From Thimphu
