This paper proposes and illustrates a methodology to assess the economic cost of the sovereign risk finance instruments available to the Government of Ethiopia and its development partners for financing the shock-responsive scalability component of the Productive Safety Net Programme. The methodology involves:
specifying rules for when additional expenditures would be triggered in each woreda;
specifying alternative risk finance strategies; and
analyzing the costs of each risk financing strategy, including sensitivity and scenario testing of the results
The methodology is applied to a hypothetical set of rules for drought-responsive scalability, and a range of potential risk finance strategies.
This working paper received financial support from the Department for International Development’s Humanitarian Innovation and Evidence Programme (HIEP) Sovereign Disaster Risk Finance and Insurance Project