Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) Report Number: ICRR0022998 1. Operation Information Operation ID Operation Name P122738 PA CAT DDO Country Practice Area (Lead) Panama Urban, Resilience and Land Non-Programmatic DPF L/C/TF Number(s) Closing Date (Original) Total Financing (USD) IBRD-80870 30-Nov-2012 66,000,000.00 Bank Approval Date Closing Date (Actual) 18-Oct-2011 30-Jun-2021 IBRD/IDA (USD) Co-financing (USD) Original Commitment 66,000,000.00 0.00 Revised Commitment 66,000,000.00 0.00 Actual 66,000,000.00 0.00 Prepared by Reviewed by ICR Review Coordinator Group Ranga Rajan Fernando Manibog Kavita Mathur IEGSD Krishnamani 2. Program Objectives and Pillars/Policy Areas DEVOBJ_TBL a. Objectives The development objective of this Development Policy Loan (DPL) operation as stated in the Program Document (PD, page iv) was: "to enhance the Government of Panama's capacity to implement its disaster risk management (DRM) program for natural disasters". Page 1 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) b. Pillars/Policy Areas The development objectives were to be achieved through reforms in one pillar/policy area "strengthening of the policy and institutional frameworks for DRM". c. Comments on Program Cost, Financing and Dates Financing. An IBRD loan of US$66.00 million financed this single-tranche DPL with a Catastrophe Deferred Drawdown Operation (CAT-DDO). The PD (page 3) notes that the standard drawdown period for a DPL with a CAT DDO is three years, that is renewable four times for a total of fifteen years. The loan was fully disbursed. Dates. The Bank approved the operation on October 18, 2011, and it became effective on March 7, 2012. The operation was scheduled to close on November 30, 2012. The operation's closing date was renewed three times: on May 1, 2014, May 27, 2017 and October 27, 2020. The operation closed on June 30, 2021. Other changes. In April 2016, the Government requested a first withdrawal in the amount of US$25.00 million (38% of the loan) to respond to the 2015-2016 El-Nino event. The withdrawal was used for financing urgent water-provision interventions in the areas most affected by the drought. The second renewal was on May 2014. According to the clarification provided by the team, the Government requested withdrawal of the remaining US$41.00 million (62% of the loan) to cope with the effects of the COVID- 19 pandemic in March 2011. As the original LA excluded funding for pandemics, the agreement was restructured to allow drawdowns for public health-related emergencies. During this renewal, the Government established new, non-binding targets for the key outcome indicators in the original policy matrix. The third renewal was approved on October 27, 2020, when the loan was fully disbursed. The ICR (paragraph 23) notes that for the first time a client government requested renewal of a fully disbursed DPL with a CAT DDO operation. Both the Government and the Bank agreed on the benefits from the loan remaining active, in that it would provide a suitable forum for continuing the DRM/Climate Change Adaptation (CCA) policy dialogue and supervision of progress of Panama's DRM program. According to the clarifications provided by the team, this extension enabled the government to maintain continued policy dialogue with the Ministry of Economy and Finance and support the review and strengthening of policy reform targets. As part of the COVID-19 response, the Government identified some critical areas to improve its DRM program. 3. Relevance of Design a. Relevance of Objectives Country context. Due to its geographic location, Panama is vulnerable to a variety of natural hazards. This vulnerability was manifested in December 2010, when intensive rainfall across Panama caused widespread flooding. In its wake, several areas of Panama lacked potable water for weeks. As the Government did not have enough contingency reserves for post-disaster rehabilitation activities, it was forced to request the National Assembly for temporary suspension of the financial limits of the Social and Fiscal Responsibility Law of 2008 (this law required the government to restrain spending for meeting the fiscal target, in the event of an Page 2 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) economic slowdown or other external factors that caused the tax revenues to be lower than projected). Given that natural hazards have regressive distribution effects as the poor are more vulnerable to such hazards, mobilizing resources quickly in the event of natural hazards, having robust financial protection strategies (including contingency facilities) for overall disaster risk reduction (DRR), and strengthening the Disaster Risk Management (DRM) and Climate Change Adaptation (CCA) systems were important to the Government strategy. Government strategy. Before appraisal, the Government had taken several steps for moving towards proactive management of disasters as opposed to treating them as adverse exogenous shocks. Following the global adoption of the Hyogo Framework for Action (HFA) in 2005, Panama was the first country in the Central American region to develop a National Platform for DRR. At the regional level, Panama adopted the Central American Comprehensive Risk Management Policy in 2010. The Government adopted four sector policies and institutional actions to address DRR: (1) a comprehensive DRM strategy in 2010; (2) a Disaster Risk Management National Plan (PNGR) for 2011- 2015 operationalizing the strategy; (3) the National Emergencies Plan that complemented the PNGR plan and focused on emergency management and first response; and (4) the Government's strategic plan for 2010-2014 that included CCA in its policy matrix. Alongside these measures, the Government was finalizing a risk financing strategy and this operation complemented the other financial tools of the Panama authorities to support the existing institutional framework for DRM. The PDO was also relevant to the 2020 Government's Operational Plan for the Prevention and Control of COVID -19 pandemic. Bank strategy. The PDO was well-aligned with the Bank strategy. The Country Partnership Strategy (CPS) for 2011-2014 identified strengthening DRM as a key area for Bank support. The PDO was well-aligned with the third pillar of the current Country Partnership Framework (CPF) for 2018-2021 "Bolstering resilience and sustainability". The CPF recognized that Panama needs to continuously improve its fiscal and policy management capacity to quickly respond to natural disasters and highlighted the need for mainstreaming risk management in public policy for protecting critical infrastructure and services. Previous Bank experience. When this operation was under preparation, the Bank was supporting the government's DRM program through Technical Assistance (TA), Investment lending projects and a DPO. For example, Panama was a participant in the Central America Probabilistic Risk Assessment (CAPRA) initiative, funded by the Global Facility for Disaster Reduction and Recovery (GFDRR) and supported by the Bank. Also, the Metro Water and Sanitation Improvement and Water Supply and Sanitation in Low-income Communities projects aimed to improve access to safe drinking water and sanitation. These projects complemented this operation, given that in a catastrophe, the poor and vulnerable groups are exposed to higher risks of suffering gastrointestinal illness. Finally, the First Programmatic Fiscal Management and Efficiency of Expenditures Development Policy Loan, aimed to support the government objectives of strengthening fiscal management, enhancing transparency, improving the efficiency of public spending and strengthening social safety net programs. This was the first DPL with a Catastrophe Deferred Drawback Operation (CAT-DDO) in Panama, aimed to enhance the Government's capacity to implement its DRM program. Although the original LA excluded funding for pandemics, the Bank restructured the loan agreement at the Government's request to fund COVID-19 pandemic related activities. The Bank processed the third renewal even though the loan was fully disbursed, as both the Government and the Bank agreed that there would be benefits in continuing the DRM/ CCA policy dialogue and supervising progress of the Panama's DRM program. At appraisal, the Bank concluded that Panama's macroeconomic outlook was adequate for supporting the DPL operation, based on Page 3 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) the International Monetary Fund's (IMF) assessment of Panama's macroeconomic outlook. The analytical underpinnings of this operation were sound (discussed below). The Bank financing for this operation intended to provide Panama with: (i) a fiscal buffer for reducing the impact of future disasters; (ii) ensuring that budget resources are not diverted from other development programs; and (iii) providing bridge financing for immediate response - was appropriate use of Bank resources, given that natural disasters disproportionately impact the poor. b. Relevance of Prior Actions Rationale There was one policy area/pillar: "Strengthening of the policy and institutional frameworks for DRM". This pillar aimed to strengthen the Government's policy and institutional frameworks for implementing the Government's DRM program. There were three prior actions (PAs). PA 1. The Government adopted a Comprehensive National Risk Management Strategy (PNGIRD) in 2010. The PINGIRD identified five pillars to guide Panama's DRM goals: (i) developing financial mechanisms for reducing the vulnerability of public investments through introducing DRR considerations in the investment planning process; (ii) focusing on social development and compensatory measures to reduce vulnerability; (iii) targeting environmental dimensions of DRM, particularly adaptation to climate change and water resources management; (iv) focusing on governance and territorial management, stressing the relevance of local DRM and other urban dimensions of risk, along with the pivotal role of sub-national level entities; and (v) identifying key DRM actions to be implemented at the national and subnational levels. The analytical underpinnings of this prior action were based on: (i) The Hyogo Framework for Action 2005 - 2015, by the United Nations International Strategy for Disaster Reduction Secretariat. This framework provided guidelines for implementing comprehensive DRM actions; (ii) Natural Disaster Hotspots, A Global Risk Analysis", World Bank 2005, This work provided an analysis of the level of countries' risk to hydrometeorological risks; and (iii) The Global Assessment Report on Disaster Risk Reduction, by the United Nations International Strategy for Disaster Reduction. This assessment provided a comprehensive review and analysis of the natural hazards threatening mankind. Developing an integrated and comprehensive DRM strategy at the national level demonstrates government's commitment towards a more proactive approach for managing natural disasters. However, this prior action focused only on upstream policies. Given that the operation was implemented over a period of twelve years (2010 to 2022), there is little evidence of the extent to which the strategy helped realizing the five goals of the PINGRID strategy (such as, developing financial mechanisms for reducing vulnerability of public investments, focusing on compensatory measures, targeting environmental dimensions of DRM relating to climate change adaptation and water resources management and governance and territorial management). It is also not clear the extent to which the strategy helped in mainstreaming downstream key DRM actions at the sectoral or subnational levels in the twelve years of this operation. Therefore, the relevance of PA 1 is as moderately satisfactory. Page 4 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) PA 2. This policy area aimed to strengthen the institutional framework for implementing the DRM national policy. As a prior action, the National Civil Protection System (SINAROC) - the highest authority in Panama for DRM - adopted the updated National Disaster Risk Management Plan (PNGR) for 2011 - 2015. The PNGR aimed at operationalizing the DRM strategy. The plan aimed to promote a multi sectoral approach for DRM policy harmonization and coordination and explicitly linked CCA to the DRR objective. The analytical underpinnings described above were relevant to this prior action. The adoption of a plan for DRM signifies that the Government is proactively managing natural disasters as opposed to treating them as adverse exogenous shocks. As with the prior action discussed above, given that twelve years had passed between 2010 and 2022, this prior action focused only on upstream activities. The ICR provides little evidence of a downstream causal chain of milestones leading to intended outcomes. Therefore, PA 2 is rated as moderately satisfactory. PA 3. As a prior action, the Government expanded the functions and responsibilities of the Directorate of Investment, Concessions and Risks of the State (DICRE) in the Ministry of Economy and Finance (MEF) to operationalize the Disaster Risk Financing (DRF) strategic framework adopted in November 2014. The DICRE's mandate, included designing risk management programs for protecting government assets, developing cost- effective and accessible financing mechanisms for immediate liquidity that can be rapidly channeled to priority sectors, and reducing the impact of natural disasters at the individual, community and national levels. The analytical underpinnings of this prior action were based on the "Natural Hazards, Unnatural Disasters. The Economics of Effective Prevention", World Bank and United Nations, 2010. This report focused on the economics of reducing vulnerability to natural disasters and presented examples from round the world that demonstrated that government investments in ex-ante DRM measures to priority sectors can be more cost- effective than relying solely on emergency measures. The analytical underpinning of this prior action was sound. Given that a risk financing strategy would enable the country to be better prepared for financing natural disasters, this prior action was appropriate. Therefore, the relevance of this PA 3 is satisfactory. The PDO was highly relevant to the Government and current Bank strategy for Panama. PAs 1 and 2 aimed to strengthen the policy and institutional for DRM. PA 3 aimed to improve the disaster risk financing strategy. However, given that the project was approved twelve years ago, the results chain linking the PA 1 and 2 to the intended outcomes was not clear. It is also not clear whether these prior actions contributed to the intended outcome at the sectoral and subnational levels. Therefore, PA 1 and 2 are moderately satisfactory. PA 3 aimed at developing a risk financing strategy which would enable the country to be better prepared for financing national disasters was satisfactory. Assigning equal value to each prior Action, the simple average of the three Prior Actions is 3.66. Therefore, the overall relevance of design is moderately satisfactory. Rating Moderately Satisfactory 4. Relevance of Results Indicators Page 5 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) Rationale Pillar One. Strengthening the policy framework for DRM. This pillar aimed to strengthen the Government's policy and institutional frameworks for implementing the Government's DRM program. There were three results indicators. Results Indicators (RI) 1 - 3. There were two original RIs: (i) The Ministry of Economy and Finance (MEF) incorporated disaster risk criteria in the National Public Investment System (SNIP)and (ii) Increase in the number of provinces with updated protocols for disaster preparedness and response. An indicator was added when the operation was renewed in March 2020. (iii) The Panama City develops emergency protocols for the recently inaugurated metro. Reforms aimed to incorporate disaster risk criteria in the SNIP, increase in the number of provinces with updated protocols for disaster preparedness and response and developing emergency protocols were likely to increase the Government's policy framework for addressing DRM measures. The indicators measured progress towards strengthening the policy framework for addressing DRM measures at the central level and at the subnational levels (provinces and Panama City). The indicators were appropriate and were verifiable. Therefore, the relevance of the results indicators is substantial. Pillar Two. Strengthening the institutional framework for implementing the Government's DRM program. This policy area aimed to strengthen the institutional framework for implementing the DRM national policy. There was one results indicator. RI 4. This indicator required that at least three ministries - the Ministry of Economy and Finance (MEF), the Ministry of Housing and Territorial Development (MIVIOT) and the Ministry of Environment (MIAMBIENTE) implement DRR priority actions identified in the PNGR. This indicator could be verified as well as causally support the achievement of the intended project development objective of strengthening the institutional framework for implementing Panama's DRM program. Therefore, the relevance of this is indicator is substantial. Pillar Three. Strengthening the framework for developing financial disaster risk protection strategies. This pillar aimed to improve the framework for developing disaster risk protection strategies RI 5 -6. . There were two results indicators: (i) The Government adopts the Disaster Risk Financing Insurance (DRF) strategic framework prepared by the Directorate of Investment, Concessions and Risks of the State (DICRE) in the MEF; and (ii) The Government formally adopts the operational plan for DRF. These indicators could be verified and were appropriate for the intended objective of developing sources of financing for disaster risks. Therefore, the relevance of the results indicators is substantial. Table. Results Indicators (RIs), the Prior Actions (PAs) they support, baseline values, target values, actual change in RI relative to target and RI achievement rating. Target Actual Baseline Actual RI Associated RI (including change in RIs (including units value of achievement PAs relevance units and target and dates) target rating dates) relative to Page 6 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) targeted change PDO: Strengthening the policy and institutional framework for DRM. RI 1. Disaster risk criteria incorporated Actual in the Baseline (2011): Target Target PA 1. Substantial (2021): Satisfactory National Not incorporated. (2012): Yes realized 100%. Public Investment System. RI 2. Number of provinces with updated Actual protocols for Baseline (2012): Target Target Highly PA 1. Substantial (2016): disaster 1 (2014): 4 exceeded Satisfactory 10 preparedness and disaster response. RI 3. Develop emergency Actual protocols for Baseline (2010): Target: Target PA 1. Substantial (2021): Satisfactory Panama City 0 (2017): Yes realized. yes (subway) metro. RI 4. Three ministries carried out Disaster Risk Reduction Baseline (2012): Target Actual Target Highly plans. PA 2. Substantial 0 (2010): 3. (2017): 6. exceeded Satisfactory identified in the National Risk Management National Plan. RI 5. DICRE’s PA 3. Substantial Baseline (2010): Target Actual Target Satisfactory Disaster Risk Not adopted. (2014): Yes (2021): realized Financing Yes and Insurance Strategic Framework Page 7 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) (DRF) is formally adopted. RI 6: Operational Baseline (2010): Target Actual Target plan for the PA 3. Substantial Satisfactory Not adopted. (2014): Yes Yes realized DRF is adopted. Rating Satisfactory 5. Achievement of Objectives (Efficacy) EFFICACY_TBL OBJECTIVE 1 Objective To enhance the Government of Panama's capacity to implement its disaster risk management (DRM) program for natural disasters. Rationale Theory of change Reforms in this operation aimed to strengthen the policy and institutional framework for DRM and implementing a disaster risk financing strategy. Adopting a comprehensive DRM policy framework and associated guidelines were likely to strengthening the policy framework for DRM. Reforms aimed at implementing the National Risk Management Plan (PNGR) were likely to strengthen the institutional framework for DRM. Reforms aimed at providing a clear mandate to the Directorate of Investment, Concessions and Risks of the State (DICRE) in the Ministry of Economy and Finance (MEF) were likely to aid in implementing a National Disaster Risk financing strategy. These activities together were likely to contribute to the intended outcome of enhancing the Government's capacity to implement its DRM program. The theory of change explicitly assumes that: (i) the Government will remain fully committed to strengthen its DRM capacity; and (ii) the Bank and the Government will continue with the policy dialogue to ensure that Disaster Risk Reductions (DRR) actions are carried out by the respective government agencies. Outputs.  The operation provided targeted technical assistance (TA) to the critical government institutions responsible for formulating DRR and CCA policies and prioritizing DRR interventions. The government institutions included the MEF, the Ministry of Housing and Territorial Management (MIVIOT), the Ministry of Education (MEDUCA), the Ministry of Health (MINSA) and the National Aqueducts and Sewers Institute (IDAAN). The operation provided TA on key DRR areas such as: (i) risk financing and insurance; (ii) improving the country's understanding of its evolving disaster risk profile, including the increasing risk posed by public health emergencies; and (iii) seismic and flood risk studies using the Probabilistic Risk Assessment (CAPRA) Platform (the CAPRA initiative started in 2008, is a partnership between the Coordination Center for the Prevention of Natural Disasters and the Dominican Republic (CEPRENAC), the United Nations International Strategy for Disaster Risk Reduction (UN ISDR) and the World Bank/Global Facility for Disaster Risk Reduction (GFDRR). This Page 8 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) initiative aimed to raise disaster risk awareness among countries in Central America by providing better tools to understand the levels of risks resulting from natural hazards.  The National Civil Protection System (SINAPROC) prepared the National Disaster Risk Management plan for 2019-2030. The adoption of the plan was however temporarily delayed due to the government's ongoing response to the COVID-19 pandemic. Outcomes. Strengthening the policy and the institutional framework for implementing the Government's DRM program. (PA 1: RIs 1 -3)  The Directorate of Investment Programming (DPI) in the MEF incorporated disaster risk criteria in the National Public Investment System (SINIP) in 2012. The DPI developed a budget classifier to track and report expenditures in DRR related activities for enabling the government agencies to track investment proposals and resources earmarked for exante DRM interventions. The methodology for implementing this system was piloted in 2017. The system is used for budget preparation since 2018. The DPI also incorporated disaster risk guidelines in the SINIP procedures and developed directives for integrating disaster risk considerations in public investment assessments. Finally, as part of the DPI's approval process for new infrastructure projects, the DPI developed guidelines describing the methodology for new investment proposals. These guidelines aimed to mainstream disaster risk analysis in public investment processes and incorporate corrective DRR/CCA considerations in the pre-investment phase of new public infrastructure projects and supervision of works during implementation. Applying these guidelines is now a requirement, and each new public investment proposal is required to meet certain disaster resilience criteria to get DPI approval, which is needed to obtain government financing.  Four provinces updated protocols for disaster preparedness and response in December 2014 (as compared to one at the baseline in October 2012). New consolidated updated protocols were completed for six more provinces in 2016. With this, ten provinces had updated protocols for disaster preparedness and response when the operation closed, as compared to the original target of four.  Emergency protocols were completed for the recently inaugurated "metro of Panama City" in 2017 by the Panama Metro as targeted. Strengthening the institutional framework for implementing the Government's DRM program. (PA 2: RI 4).  This indicator measured the number of ministries implementing DRR priority actions identified in the National Disaster Risk Management Plan (PNGR) for 2011-2015. Three ministries (the Ministry of Economy and Finance, the Ministry of Housing and Territorial Development, and the Ministry of Environment) implemented DRR priority actions in 2011 as targeted. Three more government agencies (the Ministry of Education, the Ministry of Health, and the National Aqueducts and Sewers Institute) implemented relevant priority actions in 2014. With this, six government agencies implemented DRR priority actions, exceeding the original target of three.  The National Policy for integrated Water Resources Management was updated by the National Environmental Authority. This updated policy introduced key elements of DRM in the water sector. Page 9 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) Strengthening the framework for developing financial disaster risk protection strategies. (PA3: RIs 5 and 6).  The Government adopted the Disaster Risk Financing and Insurance strategic framework strategy on November 13, 2014. Panama was the first country in the Central American region with a legal framework for Disaster Risk financing strategy. The strategy comprised five pillars: (i) improving risk identification capabilities through using information from a probabilistic disaster risk analyses; (ii) requiring assessments during the pre-investment phase of public investments and making risk analysis mandatory for selecting, prioritizing and financing public investments; (iii) identifying sources of financing for disaster risk financing, including though budget reallocations, contingent lines of credit, post-disaster loans and co-insurance schemes; (iv) strengthening the domestic insurance market, including through agricultural and micro-insurance schemes; and (v) strengthening the Directorate of Investment, Concessions and Risks of the State (DICRE) to enable MEF carrying out its mandate for designing and implementing financial protection schemes.  MEF with TA from the Bank, adopted a Five-year operational plan to implement the DRF Strategic Framework.  With TA from the Bank, MEF conducted a cost-benefit analysis of potential disaster financing strategies. Following this assessment, Panama joined the Caribbean Catastrophe Risk Insurance Facility - Segregated Portfolio Company (CCRIF-SPC), as this sovereign insurance strategy was deemed to provide optimal catastrophic insurance for Panama. Drawdown of the Cat DDO.  In April 2016, the Government requested a first withdrawal in the amount of US$25.00 million to respond to the 2015-2016 El-Nino event. The withdrawal was used for financing urgent water- provision interventions in the areas most affected by the drought.  In March 2020, the Government declared a state of national emergency following the COVID-19 pandemic, which triggered the withdrawal of the remaining US$41.00 million of undisbursed funds to support the government's response to the public health crisis. Rating Satisfactory OVERALL EFF TBL OLD Overall Achievement of Objectives (Efficacy) Rationale The six results indicators were rated as substantial. Given that the indicators were either realized or surpassed, overall efficacy is rated as satisfactory. Overall Efficacy Rating Page 10 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) Satisfactory 6. Outcome Rationale The operation's development objectives are highly relevant to the Government and the current Bank strategy for Panama. The prior actions were based on solid analytical underpinnings. However, given that the project was approved twelve years ago, the results chain linking the PA 1 and 2 to the intended outcomes was unclear. The operation's efficacy is satisfactory. The original outcome targets were realized and targets for some indicators were expanded when the project was renewed the second time. The expanded targets were realized. The Cat DDO achieved the development objective and the operation helped by providing immediate liquidity to support the Government's efforts to contain the spread of the COVID-19 pandemic. The overall outcome is satisfactory. a. Rating Satisfactory 7. Risk to Development Outcome Government commitment. There is a negligible risk to development outcome from lack of government commitment. The government demonstrated its commitment to strengthening DRM during implementation through actions aimed at (i) updating the National Civil Protection System; (ii) updating the National Disaster Risk Management Plan (PNGR) by incorporating key lessons from the COVID-19 emergency response; (iii) designing a National Meteorological and Hydrological Service (NMHS); and (iv) strengthening the Territorial development in the MEF with a strong emphasis on incorporating DRR/CCA at all administrative levels including into subnational planning. The Government commitment to DRR during the implementation of this operation was also demonstrated by its request to renew the operation even though the loan had been fully disbursed. The Government also identified the need for a new DPL with Cat DDO for strengthening its capacity to respond to not only climate and natural hazards, but for public health emergencies as well. Finally, on August 24, 2021, the Government approved the creation of the Cabinet for Comprehensive DRM (GIRD cabinet) as a high-level policy coordination entity under the direct oversight of the Presidency, with a mandate for ensuring implementation of the DRM agenda in Panama. According to the clarifications provided by the team, the GIRD cabinet is expected to approve the policy (PNGIRD) and Plan (PNGR) on a special session on October 13, commemorating the International Day for Disaster Risk Reduction. 8. Assessment of Bank Performance a. Bank Performance – Design Rationale Page 11 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) The Bank prepared this operation based on the lessons from previous Bank-financed DPL with Cat DDO operations in Costa Rica, Colombia, El Salvador, Guatemala, Peru and the Philippines. The lessons included: (i) the need for proactively managing disasters rather than treating them as exogenous shocks; (ii) adequate risk identification is required for efficient DRM; (iii) having an exante reconstruction strategy for faster recovery after a disaster event; (iv) recognizing that governments can take many actions for reducing disaster risk without incurring additional costs, such as by disclosing information about hazards and risks to the public (such as through publishing maps of flood plains and seismic fault lines); and (iv) securing a flexible source of funding to cover early recovery in case of a natural disaster. Before this operation was conceived, the Bank team had already started a DRM dialogue with senior representatives of key Government agencies including the MEF and disaster-sensitive line ministries. The resulting design focused on addressing the key policy issues that the Government identified as critical for improving its DRM capacity and its efforts to build resilience against natural hazards and the effects of climate change. The Bank prepared this operation in close collaboration with the IMF and other key partners working on DRM initiatives in Panama and Central America, such as the Central American Coordination Center for National Risk Prevention (CEPREDENAC), the United Nations International Strategy for Disaster Reduction (UNISDR) in Central America, the Inter-American Development Bank (IADB), the United States Agency for International Development (USAID), the European Union (EU) and Japan International Cooperation Agency (JICA). The analytical underpinnings of this operation were sound (discussed in Section Three). The Bank identified three risks at appraisal: economic, political and institutional risks. With mitigation measures, economic and political risk was assessed as moderate. However, institutional risk was assessed as high, as Panama's public sector institutions and fiduciary systems were relatively weak as compared to other regional countries. The risk mitigation measures incorporated at design proved to be adequate during implementation. Rating Satisfactory b. Bank Performance – Implementation Rationale The supervision team provided support through frequent supervision and technical missions. Fourteen Implementation Status Results (ISR) Reports were filed over the project lifetime of about nine years (implying an average of twice a year missions). The missions included experts from Bank's Global practices as well as international experts. The ICR (paragraph 57) notes that there were also other type of interactions, including the participation of senior Government staff in Bank-sponsored regional technical meetings and workshops that allowed the Bank team to advance the DRM/CCA dialogue. Collaboration and coordination between the Bank team and the Government contributed to identifying emerging needs and timely response to those needs. This was reflected in the two instances in which the Cat DDO was triggered. In the second instance, the Bank team Page 12 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) was able to swiftly obtain Bank Management approval for the removal of the Loan Agreement constraint that limited the Government's ability to withdraw funds for addressing public health emergencies. Rating Satisfactory c. Overall Bank Performance Rationale Overall Bank performance is rated as satisfactory. Overall Bank Performance Rating Satisfactory 9. Other Impacts a. Social and Poverty This operation was not designed to directly support policies related to poverty reduction or social impacts. However, the operation had positive impacts on the poor by supporting policies that helped to alleviate poverty. For instance, the activation of the CAT-DDO during the severe drought of 2015- 2016 contributed to the continuity of social development plans targeting the poor (ICR, paragraph 44). b. Environmental The Program Document (paragraph 107) noted that this operation was likely to have positive effects on the environment and natural resources, by providing the Government with funding for measures that reduce environmental degradation. There were no adverse environmental impacts during implementation. c. Gender This operation was not designed to directly support policies related to gender. d. Other Page 13 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) An unintended outcome was Panama's participation in regional efforts to coordinate disaster preparedness and emergency response. Recognizing that Panama cannot address the multi-jurisdictional impact of climate change alone, the Government took steps to: (i) better integrate its national Disaster Risk Reductions (DRR) efforts with those of the Central American Integration System's (SICA), a specialized DRR body, the Coordination Center for the Prevention of Natural Disasters in Central America and the Dominican Republic (CEPREDENAC); and (ii) increased its participation in the regional activities of other specialized SICA bodies, such as the Council of Ministers of Central America (COSEFIN) and the Regional Committee of Hydraulic Resources (CRRH). 10. Quality of ICR Rationale The ICR is well-written. The evidence provided in the ICR is adequate to assess the performance of this operation. The theory of change provided in the ICR clearly shows the results between the policy reforms and the intended outcomes. The ICR draws good lessons from the experience of implementing this operation. The ICR makes good use of annexes. The details provided in annex four and five enables the reader to get a better picture of the operations' achievements. a. Rating Substantial 11. Ratings Reason for Ratings ICR IEG Disagreement/Comments Outcome Satisfactory Satisfactory Bank Performance Satisfactory Satisfactory Relevance of Results --- Satisfactory Indicators Quality of ICR --- Substantial 12. Lessons The review draws the following main lessons from the ICR. which are based on the experience of implementing this operation, with some adaptation of language. 1. A clear understanding of the Government's disaster risk reduction priorities and its immediate and longer-term policy commitments can be useful in designing a successful DPL with a CAT DDO Page 14 of 15 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review PA CAT DDO (P122738) operation. Even before this operation was prepared, the Bank team engaged in a disaster risk reduction policy dialogue with key Government authorities. This dialogue facilitated proper identification of policy instruments that were important to the Government. 2. The timely assessment of progress is important, in the event of a renewal of a DPL with CAT DDO. Such an assessment may uncover new areas or identify changes to the results framework. For example, for the second renewal of this operation, although the Government had already met the targets for the results indicators, the Bank and the Government agreed to adopt non-mandatory expanded values for some targets. This expansion helped to advance the DRM policy dialogue and maintain the Government's access to the Bank's specialized technical assistance. 3. The Bank's inclusion of public health emergencies as drawdown triggers for new DPLs with a CAT DDO operations could be useful. In the context of the ongoing COVID-19 pandemic, the difficulties experienced in Panama due to the explicit exclusion in the Loan Agreement of public health as a drawdown trigger demonstrated the need to explicitly indicate in the operation's Loan Agreement that certain public health related emergencies can qualify for drawdowns. 4. The value added of a DPL with a CAT DDO may well go beyond its role as a source of quick liquidity in the aftermath of a catastrophic event. This operation was renewed twice and the second renewal was at Government request when the loan had been fully disbursed. This demonstrates that in addition to the financial function of the instrument, borrowers value the policy advice and technical assistance as part of the operation. 13. Project Performance Assessment Report (PPAR) Recommended? No Page 15 of 15