Global Assessment Report on Disaster Risk Reduction 2013
From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction


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Part I - Chapter 5
(Source: UNISDR, based on GAR global risk model and World Bank dataiii )
Box 5.1 Estimating a government’s direct burden
Figure 5.3 Fiscal probable maximum losses (PML) from earthquakes with a 250 years return period compared with national revenue
The GAR13 model also takes into account losses to produced capital stock under government responsibility. These include government buildings and public structures as well as housing for low-income communities. These types of losses are here defined as ‘fiscal losses’, as they represent the sovereign or fiscal risk of a government in case of a disaster. They are calculated as part of total annual average losses to buildings, both public and private ii .
As infrastructure replacement costs are likely to constitute an important part of a government’s direct burden, fiscal losses presented here are likely to be underestimated. Nevertheless, they provide an important reference for governments. For example, fiscal losses from a 1 in 250 years return period earthquake can amount to more than US$9 billion for the Philippines and US$3 billion for Colombia. China and Mexico both face fiscal losses from earthquakes of about US$4 billion, whereas fiscal losses from cyclonic wind damage would amount to US$17 billion for China and more than US$13 billion for Mexico.
The scale of these losses is better understood when comparing them with national or government revenue, i.e. a country’s income from taxes and non-tax sources. National revenue can be seen as a proxy for a country’s ability to buffer losses. Figure 5.3 shows probable maximum fiscal losses from earthquakes compared with national revenue. In the case of the Philippines, losses amount to about 27 percent of government revenue, whereas for the Dominican Republic and Bhutan, probable maximum fiscal losses may exceed 13 percent of their revenue. The Philippines displays an equally significant fiscal vulnerability to wind damage, highlighting how losses can easily exceed government revenue, potentially resulting in an increased debt burden.
(Source: UNISDR)
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