INTRODUCTION
The seventh step is to identify immediate financial resources to meet public and private sector needs for recovery. The lead agency can identify all of the potential sources of finance.
To meet public sector recovery needs, potential sources range from regular government budget diversion, to special government budget allocation, to low-interest loans from international development partners. To meet private sector recovery needs, for the poorest and most vulnerable affected population, targeted direct financial or other resource assistance may be provided by the government. To facilitate the recovery of revenue-generating businesses (which is in the interest of the government), government assistance may include temporary reduction or freeze in selected taxes or charges, soft-term credit facilities, or purchase of equity.
In line with the previous steps and the recovery strategic framework and policies, the lead agency may convene a forum with government departments and international development partners to discuss the proposed sources of finance.
RESOURCES AVAILABLE TO IMMEDIATELY FINANCE THE POST-DISASTER PRIORITY RECOVERY NEEDS
In order to fast-track the post-disaster recovery, the lead agency must identify all the possible sources of financing for the post-disaster priorities needs, whether public or private. For instance, roads and bridges may be the main responsibility of the government to restore access and mobility of the people, but the normalization of livelihoods (which is equally important) are private needs in nature.
However, public and private needs can be addressed through various approaches. The following explains the possible sources of funding for the public and private sectors.
RESOURCES FOR PUBLIC SECTOR NEEDS
Normally the government bears the cost of post-disaster recovery and reconstruction of government facilities and other assets in the public sector. The following are, generally, the sources of funds which can be considered:
- The regular budget. The country or province has an allocated budget for the year for specific uses. In cases of extreme disasters, budget for existing projects can be diverted temporarily for urgent recovery projects. However, this may need the concurrence and approval of the legislative branch of the government.
- Special additional budget allocation. If and when existing financial resources may not be enough to respond to urgent recovery activities, an additional special budget may be requested from the legislative branch of the government or from international development partners.
- Existing programs with international development partners. There may be some existing programs and projects funded by international development partners which can be tapped to fund the identified post-disaster activities. For example, arrangements can potentially be negotiated with non-government donors like Oxfam, CARE, Plan International, among others, to assist in funding priority projects.
- Existing programs and stand by agreements with official development assistance donors. There may be some existing programs and projects funded by international development partners which can be diverted to fund the identified post-disaster activities in agreement with the donor.
- Loans. Loans to finance recovery and reconstruction may be secured from official development assistance (ODA) donors. This, however, should be subjected to deeper analysis to further analyze the potential impacts on the future fiscal position.
- New taxes. Although theoretically the government can impose new taxes to fund post-disaster recovery, such a measure is generally not a preferred option. A country or province ravaged by a disaster will not be able to bear additional taxation.
RESOURCES FOR PRIVATE SECTOR NEEDS
Private sector needs should be equally considered by the government, especially if a large number of the affected population depend on the sector for their livelihood.
In most instances, governments directly subsidize the needs of the poorest population which are mostly:
- Housing assistance through the provision of housing materials;
- Livelihood restoration especially for those who are engaged in marginal livelihoods like small farmers and fishermen through the distribution of free seeds, farm tools, livestock, etc.
- Temporary source of income like emergency employment through cash- or food-for-work; and
- Alternative employment through job placement or referrals, skills training, etc.
However, for the housing needs of those who are not poorest of the poor and the needs of other revenue-generating private businesses (like those in manufacturing, mining, power or water supply), assistance can be extended in the form of credit and other tax incentives. It should be noted that tax breaks and other financial incentives will not need financial outlays or new expenses from the side of the government.
The following are the types of assistance that can be extended by the government to the private sector:
1. TAX BREAKS TO BUSINESS FIRMS AND HOUSE OWNERS. Exempting businesses and households from paying certain taxes for a certain period, for example 2 years, will enable them to finance repairs immediately, because they are assured that they will have savings from such tax exemptions. It will be an incentive for the firms and households to act expeditiously.
Some of the specific options are:
a. Temporary reduction or freeze in the collection of value-added tax, building permits for repairs and other related fees for destroyed houses and buildings;
b. Temporary elimination of import duties on essential items required as to rehabilitate the firms and restore their operations;
c. Temporary freeze on certain charges in the utilization of goods and services, like amortization of housing loans from government banks, rent on government land where installations are located over the time of the recovery phase;
d. Non-collection of property taxes on houses or equipment registration fees that may have been destroyed by the disaster, especially those that were not insured, until they have been repaired, replaced or reconstructed.
2. CREDIT. A credit scheme with soft terms, like low interest rate with longer repayment periods, will enable households to repair their housing units and provide firms the resources to buy stocks, machinery and equipment that will normalize operations.
Credit can be channeled through existing government programs or through the private banking system with a government guarantee which can be implemented through a policy directive. This will not need any monetary outlay from the government except for the liability associated with the guarantee.
3. EQUITY. In some special cases, the government may opt to provide equity in private firms instead of direct subsidy or credit or tax exemptions. For example, the government can infuse equity funds to mining firms to enable them to recover.
CONSULTING WITH RECOVERY STAKEHOLDERS ON PROPOSED SOURCES OF RECOVERY FINANCE
In line with the previous steps and the recovery strategic framework and policies, the lead agency may convene a forum with government departments and international development partners to discuss the proposed sources of finance.
