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Fiscal Resilience to Natural Disasters

Lessons from Country Experiences

image of Fiscal Resilience to Natural Disasters

Natural disasters continue to cause widespread damage and losses, with fast growing economies particularly exposed. Governments often shoulder a significant share of the costs of disaster recovery and reconstruction. This is true in OECD countries and even more so in developing economies, where private insurance markets are not as well developed. The fiscal impact of disasters on a government’s budget can be sizeable. Expenditures for the government arise from both explicit and implicit commitments to compensate for disaster losses. This report presents the results of a study that compares country practices in the management of the financial implications of disasters on government finances for a set of OECD member and partner countries particularly exposed to natural hazards.

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Peru

The risk of disasters caused by natural hazards in Peru is linked to its geographical location and the nature of its exposed assets and infrastructure. Peru is located on the Pacific Ring of Fire, a region exposed to major earthquakes and active volcanoes. In addition, the presence of the Humboldt Current, the proximity of the Equator, the influence of the Amazon region, and Peru’s rugged terrain traversed by the Andes mountains expose Peru to a number of geological hazards, including mudflows, and landslides. Its location in the tropical and subtropical belts on the western coast of the South American continent also exposes Peru to climatological events such as the El Niño phenomenon, which can cause extreme rainfall, floods, droughts, freezes, hailstorms, and strong winds.

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