COVID-19 series: Disaster risk financing

Large health shocks such as COVID-19 carry an expensive price tag – for the response, the recovery, as well as more long-term economic losses. The response phase is typically characterised by a great sense of urgency as the public financial management (PFM) system attempts to provide funding quickly in order to curb the outbreak early. However, in many low-income countries (LICs) and lower-middle-income countries (LMICs), PFM systems lack robustness, with weaknesses across the board. This review provides a quick overview of the literature on how large health shocks impact PFM systems in LICs and LMICs and what lessons we have learned.

The publication concludes that while much of the literature reviewed here stresses the importance of financial planning, it is important to recall that for exceptionally large crises such as COVID-19, all financial planning may not be enough. Experience over the last few weeks has shown that the world, including almost all high-income countries and their highly sophisticated financial systems, was taken by surprise by COVID-19. Expecting to create fully resilient PFM systems in LICs and LMICs is unrealistic. The objective can only be to strengthen existing systems.