Central Asia eyes new financial means to weather natural disasters

Central Asia experienced catastrophic natural disasters throughout the 20th century, and international bodies like the World Bank have programmes to help make the region more financially resilient during future events.

The World Bank

2018-09-20

Khujand, shown in an undated photo, is one of Central Asia's oldest cities as well as an industrial, scientific and cultural centre of northern Tajikistan. [Stuhlberger/Zoï Environment]

CENTRAL ASIA -- Central Asians, who know disaster well, are benefiting from a number of international efforts for reducing risk.

Tashkent -- the most populated city in Central Asia today -- was razed to the ground by a 7.5-magnitude earthquake in 1966, with more than 300,000 residents reportedly losing their homes. Turkmenistan's capital of Ashgabat was also severely impacted by a 7.3-magnitude quake in 1948, with thousands of deaths reported. Dushanbe, the capital of Tajikistan, and Almaty, Kazakhstan's largest city, suffered major seismic events in 1907 and 1911, respectively.

Today, these cities are at the heart of the region's cultural dynamism and economic growth, along with many other cities and communities where residents live under significant seismic risk. Here, severe droughts and extreme temperatures are also major regional challenges.

In 2008, for example, an exceptionally cold winter created a humanitarian crisis in Tajikistan, affecting more than two million inhabitants.

Global warming affects villagers' way of life. The arid climate forces shepherds to graze their sheep higher and higher in the mountains, where the grass is better than in the lowlands. A pasture in Jalal-Abad Province, Kyrgyzstan, is shown in this undated photo. [Marat Sayranbayev]

A Tajik woman sells vegetables in Sughd Province, northern Tajikistan, in this undated photo. Agriculture is among the most risk-prone sectors in Central Asia's economies. [Stuhlberger/Zoï Environment]

Apart from these rare and devastating events, other disruptive hazards like floods, landslides, avalanches and mudflows also threaten the livelihoods and well-being of more than 70 million Central Asians. Beyond their localised impacts, these more frequent hazards can also drain local and national budgets over time, damage economic development, and push vulnerable populations into poverty.

Significant fiscal challenges

Natural disasters create significant fiscal challenges for governments in Central Asia. The World Bank (WB) estimates that the total annual damage from earthquakes in Kyrgyzstan amounts to about $200 million, with $60 million in damage from floods and $2.6 million in damage from landslides.

Moreover, approximately 25% of Central Asia's population is employed in agriculture -- which is one of the sectors most vulnerable to hydro-meteorological disasters such as flooding or drought.

From 2000-2001, a regional drought caused losses of more than $800 million in terms of lost agricultural production in five countries in Central Asia and the Caucasus. In Tajikistan, these losses were equivalent to 4.8% of its GDP and contributed to an increase in the country's current account deficit.

Trade -- another essential economic activity in Central Asia -- is also routinely impacted by natural disasters.

For instance, the main trade route (M41) running through the southern mountains of the region is affected by landslides, mudflows, rock falls and avalanches each year, slowing or completely cutting off this vital artery.

Climate change is exacerbating the impacts and threatens Central Asia's environmental stability, infrastructural integrity and urban development. Such impacts often result in severe fiscal strain for governments in Central Asia.

Innovation in combating risk

To help make Central Asian countries more financially resilient to natural hazards, the WB and other partners are working on innovative disaster risk financing mechanisms for the region, alongside targeted disaster risk management efforts.

In Kyrgyzstan, for example, the WB is supporting the newly established State Insurance Organisation to develop a mandatory disaster insurance programme scheme for private property.

The preliminary results are promising: following an earthquake in Osh Province in May 2017, more than 40 homeowners benefitted from payouts of more than 6.8 million KGS (about $100,000).

Moreover, a recently approved investment project in Tajikistan includes the development of a strategic framework for post-disaster financing to help the government improve financial planning for natural disasters. Additional regional resilience-building activities are under preparation throughout Central Asia and will also include disaster risk financing elements.

"Initiatives like these help protect against catastrophic events by identifying risk financing instruments and by exploring mechanisms that have been successful in other parts of the world," said Lilia Burunciuc, the WB regional director for Central Asia.

Global best practices

These disaster risk financing efforts across Central Asia build upon numerous global case studies and take account of global best practices.

To support the Enhancing Resilience in Kyrgyzstan project, for example, the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR) facilitated a knowledge exchange exercise in June between Kyrgyz representatives and counterparts from Turkey and Romania.

This exercise highlighted important insights from mandatory disaster insurance programmes implemented in recent years by the Turkish Catastrophe Insurance Pool (TCIP) and Romania's Insurance Pool against Natural Disasters (PAID), which cover 48% and 20% of their populations, respectively.

Given the range and scale of natural hazards occurring in Central Asian countries, disaster risk financing is fast becoming a critical element for sustainable socio-economic development.

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