The government has introduced a new disaster risk financing strategy to strengthen its ability to respond to climate-related shocks that have cost the economy an estimated 1.75 percent of Gross Domestic Product (GDP) annually since 2013.
The strategy seeks to ensure quicker recovery from disasters and reduce fiscal pressures by improving preparedness, expanding insurance coverage, and enabling faster access to emergency funds.
According to a World Bank diagnostic, Rwanda faces average annual losses of about $145 million from disasters such as floods, landslides, and earthquakes, with losses potentially reaching $345 million in extreme years.
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"From 2013 to 2023, disasters have had a profound impact on our economy through damage to key infrastructure, productive assets, and the loss of life,” said Godfrey Kabera, Minister of State for the National Treasury at the Ministry of Finance and Economic Planning (MINECOFIN).
"Floods and droughts alone have caused average annual losses equivalent to 1.75% of GDP, and these are projected to rise to 3.25% in the coming years.”
To address these growing risks, Kabera said the Disaster Risk Financing Strategy adopts a "cost-layered” approach, combining instruments such as the National Disaster Risk Fund (NDRF), contingent credit facilities like Catastrophe Deferred Drawdown Options (CAT DDOs), and sovereign insurance solutions.
CAT DDOs are financial instruments that allow governments rapid access to funds in the immediate aftermath of a natural disaster, while sovereign insurance products serve as fiscal protection against major, unexpected losses.
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"Together, these instruments will reduce the need for disruptive budget reallocations, ensure timely disaster response, and help us maintain fiscal stability,” Kabera explained. "This strategy aligns with Rwanda’s national development priorities, enhances credibility with partners, reassures investors, and signals the country’s leadership in adopting modern disaster financing solutions.”
Bridging the funding gap
Aristarque Ngoga, Permanent Secretary in the Ministry in Charge of Emergency Management, said the new National Disaster Risk Fund is crucial because the national budget alone cannot cover the high costs of recovery.
"Following the 2023 disasters, Rwanda needed about $451 million for recovery efforts, but less than half has been mobilised so far,” Ngoga said. "We are still rebuilding houses for affected families, which is why establishing a dedicated disaster fund became necessary.”
The government expects the new fund to serve as a reserve for quick disbursement when disasters strike, ensuring that recovery is not delayed by lengthy budgetary processes or donor dependencies.
Escalating climate threats
Experts say the new strategy comes at a critical time, as Rwanda faces more frequent and intense climate shocks. Qhelle Ndlovu, a senior financial sector specialist involved in developing the plan, said extreme weather events have become increasingly common since the 1980s, with floods and landslides intensifying over the past decade.
"Disasters continue to pose a significant threat to Rwanda’s agriculture and food security,” she noted. "Between 2013 and 2023, direct damages to crops from floods, storms, and landslides ranged from $14 million to $152 million.”
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Despite some growth in agricultural insurance coverage, she said it remains at just 0.05% of agricultural GDP, leaving most smallholder farmers unprotected.
"The poorest households are disproportionately affected,” Ndlovu added. "On average, disaster-related expenditure has increased steadily since 2014, accounting for between 1% and 2% of GDP and 4.3% of total government expenditure.”
Policy actions under the new strategy
The strategy outlines five major policy actions for implementation:
Swift disaster response mechanisms using contingency funds, credit lines, and safety nets to ensure immediate assistance after disasters.
Integrating disaster risk into national budgets by embedding climate resilience into fiscal planning to reduce economic disruptions.
Developing resilient infrastructure by prioritising risk-proof investments in energy, transport, and housing sectors.
Mobilising capital and sharing risks through insurance, catastrophe bonds, and regional cooperation frameworks.
Building institutional and community capacity by promoting financial literacy, disaster preparedness, and risk awareness.
Other measures include establishing a centralised disaster loss database, expanding social protection schemes for at-risk households, and introducing parametric insurance, which allows for faster payouts triggered by measurable indicators like rainfall levels or flood depth.
Officials say these steps will help reduce fiscal stress, promote financial resilience, and ensure that vulnerable households receive timely support.
Promoting resilience and investor confidence
Kabera said the new approach will not only strengthen the country’s disaster response but also boost investor confidence by showing that Rwanda is managing its climate risks strategically.
"Investors and partners want to see governments that are prepared for the unexpected,” he said. "This strategy gives confidence that Rwanda can withstand shocks without derailing its development trajectory.”
The World Bank and other partners are supporting the rollout of the plan, including technical assistance and potential financing to operationalise the National Disaster Risk Fund.
Officials believe that by combining proactive planning, financial preparedness, and community engagement, Rwanda can reduce its vulnerability to climate shocks and build a more resilient economy.
"This is about saving lives and livelihoods,” Ngoga said. "With climate change intensifying, disaster preparedness must be seen as an investment, not an expense.”