Many countries have had to reallocate budgets, issue debt, or rely on foreign aid to finance immediate relief and reconstruction efforts. Most have yet to develop robust public disaster risk financing strategies using ex-ante risk financing solutions, which includes setting aside reserves, establishing contingent credit, and tapping on insurance and capital markets. 8. Several ASEAN countries, however, have made significant strides in the right direction. For instance, Philippines has put in place a disaster risk management strategy since 2010, and implemented a parametric insurance programme covering 25 provinces, which will provide rapid liquidity for the government to enable rebuilding and recovery efforts when disaster strikes. It is now working with the World Bank on a sovereign catastrophe bond to complement the insurance programme, which will provide cover for more extreme events. Over the years, Indonesia has consistently increased its budget allocation for disaster management. Most recently, Indonesia has adopted a new disaster risk financing and insurance strategy, which encompasses the government insuring government buildings from this year. A Coordinated approach to Disaster Risk Financing 9.
The interest rate applicable to the long-term financing facility, which aims to stimulate lending, was reduced and an expanded asset purchase programme was announced. This programme includes, in addition to the purchases of asset-backed securities and covered bonds issued by the private sector, purchases of bonds issued by euro area central governments, agencies and European institutions. The size of this expanded programme is ambitious, with monthly purchases amounting to € billion. The purchases will commence in March and, in principle, it is intended that they will be carried out until September 2016, although the Governing Council of the ECB has given itself the option to continue to make purchases if the path of inflation is not consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term. The programme requires that, to be eligible for purchase, securities must be at least investment grade, or if not, that their issuers are under an EU-IMF financial assistance programme. These conditions are similar to those applied in the requirements for collateral to be eligible for monetary policy operations and those envisaged, in August 2012, in the announcement of the sovereign bond purchase programme known as Outright Monetary Transactions (OMTs). Of the additional asset purchases, 12% will be purchases of bonds issued by European institutions and the other 88% will be purchases of bonds issued by central governments and agencies of countries in proportion to their shares in the ECB’s capital key.