# **I. Introduction**

1. The past three years have presented the development community with some of its most demanding reconstruction challenges since the aftermath of World War II. While post-conflict reconstruction remains a priority in parts of Africa, the Middle East and South Asia, reconstruction after natural disasters has received equal attention, particularly after the tsunami in December 2004. Over the period from July 2006 to June 2007, there have been a total of 366 disasters—almost four times more than in 1975. These disasters included earthquakes, floods, landslides, wild fires, droughts, wind storms, epidemics and extreme temperatures, and affected almost 200,000 people, killing 18,000 and producing damage valued at almost US$30 billion.<sup>1</sup> Recent projections on the rapidity of climate change will further increase the number and intensity of natural disasters (World Bank Independent Evaluation Group, 2006).

2. The World Bank and other development partners have been involved in postdisaster reconstruction in response to the devastation resulting from the recent tsunami in Indonesia (Aceh), Sri Lanka, the Maldives and India, and also from the earthquakes in Pakistan and Indonesia (Yogyakarta/Central Java). All these activities came in addition to other large-scale post-conflict reconstruction programs in Afghanistan, East Timor, Haiti, Sudan and several other countries, most recently Lebanon. In some cases such as Aceh, the legacy of conflict and natural disaster were overlapping. While both contexts often trigger the need for a rapid scaling-up of support and are characterized by weak capacity environments, responses may be subject to important differences. A cross-cutting theme in both instances, however, was the need to strengthen (and in many cases establish) effective modalities of public financial management in accordance with local prevailing capacities and fiduciary risks.

3. The World Bank’s reconstruction and mitigation portfolio (related to naturaldisasters) has also been increasing sharply since the 1980s. During period of 1984 and 2005 there were 528 projects worth US$26.3 billion to support disaster-related activities. These represent 9.4 percent of all World Bank loan commitments since 1984. Most of them are Emergency Recovery Loans (ERLs), and include International Development Association (IDA) credits and grants (World Bank Independent Evaluation Group, 2006).

4. In most disasters, the available domestic resources are not sufficient to meet the financial and human needs. The impact of disasters in developing countries is typically disproportionately greater in terms of GDP and government revenues. Consequently, international donor agencies are frequently called upon to finance reconstruction in postdisaster and post-conflict countries. In the case of large-scale natural disasters such as the Asian tsunami, private contributions were also an important part of the reconstruction program. In these contexts, international agencies such as the World Bank are often called upon to provide support in terms of reconstruction financing and experience,

> 1 Source: ‘EM-DAT: The OFDA/CRED International Disaster Database’, July 2007, Universite Catholique de Lowain, Brussels, Belgium.

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