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This document presents the priority policy objectives that have been established to assess, reduce, and manage fiscal risk due to natural disasters in Colombia. It also describes the MHCP’s (Ministry of Finance and Public Credit) efforts to progress its policy objectives in the long term. These policy objectives represent the MHCP’s ex-ante policy framework regarding management of financial and fiscal disaster risk.

The MHCP identifies three priority policy objectives in order to strengthen management of the Government’s contingent liabilities and thus support the goal of achieving macroeconomic stability and fiscal balance. The policy objectives include: (i) Identification and understanding of fiscal risk due to disasters; (ii) financial management of natural disaster risk, including the implementation of innovative financial instruments; and (iii) catastrophe risk insurance for public assets.

The Government of Colombia (GoC) is designing a financial strategy for covering contingent liabilities generated by disasters caused by natural hazards. This initiative falls within the government’s regulatory and institutional framework for managing explicit contingent liabilities generated through public credit operations, legal actions, and administrative contracts (including public-private partnerships). The origin of this comprehensive approach to fiscal risk assessment and management can be found in Law 448 of 1998, which requires entities to include resources in their budgets for covering contingent liabilities. Law 819 of 2003, which establishes requirements for the development of a Medium-Term Fiscal Framework, stipulates that the valuation of explicit contingent liabilities must be included in this Framework.