executive summary
Angola is highly exposed to natural disasters and climate change that threaten its vital ecosystems, with drought and flooding being the most serious risks. Droughts are less frequent but tend to have longer-lasting negative impacts in rural areas, while floods are more frequent and localized in urban areas, causing direct damage and economic disruption. Climate change is expected to increase the frequency and severity of weather-related disasters, and economic and population growth is likely to further increase the economic costs of disasters.
Vulnerable households and micro, small and medium enterprises (MSMEs) are highly vulnerable to the impacts of climate change. Without safeguards, progress in poverty reduction and shared prosperity could easily be undermined by households' high vulnerability to other covariate shocks, including climate and weather-related. Financial protection solutions to strengthen the resilience of the SME sector are also critically needed as the sector is of strategic importance in job creation.
Angola's disaster response costs are largely borne by the government, with only a small portion of emergency official development assistance covering them, and large gaps in insurance coverage. From 2011 to 2020, emergency development assistance covered only 8% of total response costs, placing a huge burden on the public sector and leaving potential protection gaps in the population and economy.
Current approaches to disaster risk financing rely heavily on ex-post budget reallocation and replenishment (special financing), setting some contingency budget lines in advance, and retaining risks through budgetary mechanisms. It is. The country has a general reserve budget for unexpected expenditures, including those due to climate change, and some sectors use advance reserve budgets to fund post-disaster interventions. The Ministry of Agriculture and Forestry is the most advanced, with operational emergency budget lines and pre-arranged contingency components available for post-disaster response (Figure ES.1). There are opportunities to expand the use of pre-arranged financing and transfer risk to the private sector.
The implementation of post-disaster interventions is well-coordinated by the Standing Civil Protection Committee, which includes civil protection, finance and other key sectors. At the national level, the main executive agency is the National Civil Protection Commission (CNPC), and the Ministry of Finance, as a member of the CNPC, works with affected sectors to mobilize resources for disaster response. The same structure is being replicated at the local level, where municipalities and states may turn to higher levels of government for assistance if they are unable to respond to the situation with their own resources.
Overall, spending can be done with agility if funds are available, but public funds for disaster response are becoming increasingly tight, especially at the local level. Depending on the severity of the event, timelines can be compressed and available funds can be allocated in days or hours, but mobilizing funds for small, recurring events is more difficult and delays response times. may cause.
Currently, budget fluctuations due to oil price shocks limit the Angolan government's ability to respond to shocks in a needs-based and sustainable manner. Historically, disaster response spending in Angola has been driven by resource availability (and thus indirectly by oil revenues). Government support after natural disasters was significantly reduced and declined after the 2015 oil price shock, even though a similar number of events and people were affected. It increased from an average of US$4.7 billion per year from 2008 to 2014 to an average of US$1.1 billion per year from 2015 to 2020.
Furthermore, despite relying on risk retention, the fiscal risk management framework currently in place in Angola does not explicitly address climate-related risks. Although multiple departments within the Ministry of Finance (MINFIN) manage different types of contingent liabilities, no department is responsible for climate-related contingent liabilities. For example, the macro-financial planning department within MINFIN is responsible for monitoring risks to fiscal targets and debt sustainability, but climate risks are not explicitly considered within the scope of fiscal risk analysis. There is a need for fiscal risk models that capture climate-related risks to inform budgeting processes, and for climate risks to be included within the annual fiscal risk assessments required by fiscal responsibility legislation.
