The Morrison government will redirect $3.9bn from an unused infrastructure fund towards a new drought fund to finance $100m in drought relief and mitigation programs a year.

At a drought summit in Canberra on Friday, Scott Morrison will announce the Drought Future Fund to be set up with $3.9bn from the Building Australia Fund.

Earnings from the fund will be used to pay for water infrastructure and resilience projects, with payments of $100m a year to begin from July 2020. The balance will be reinvested into the fund so it grows to $5bn by 2028.

The fund will provide community services, research, assist with adoption of technology, advice and infrastructure to support long-term sustainability in the event of the drought, through capital or ongoing initiatives.

Criteria is yet to be determined and projects will be selected as part of the annual budget process.

Morrison said the Australian government must “deal with the here and now but also make sure we plan for the future” by “putting money aside for non-rainy days in the future”.

“This funding will support farmers and their local communities when it’s not raining,” he said. “It guarantees drought support for the men and women who drive our nation.

“The challenges of drought vary from farm to farm, district to district, town to town and we continually need to adapt and build capacity – the Future Drought Fund gives us this opportunity.”

The drought fund will be managed by the Future Fund board of guardians and is modelled on the Medical Research Future Fund.

The initial $3.9bn is the remaining balance of the Building Australia Fund, an infrastructure fund set up by Labor in 2009 to pay for transport, communications, energy and water infrastructure.

The Turnbull government closed the Building Australia Fund in the mid-year economic and fiscal outlook statement in December 2016 to provide the government with “more flexibility in managing its balance sheet”.

The summit on Friday will hear from the coordinator general for drought, Stephen Day, on the need for a coordinated response by government and the community sector.

The summit will discuss long-term resilience, with states and territories expected to draw up a new national drought agreement by the end of the year.

New South Wales has been declared 100% in drought, with 77% in drought or drought-affected and 23% experiencing an intense drought.

Parts of Queensland, including the south-east, have been in drought for seven years, with farmers warning that drier and hotter conditions have become the new norm and the current drought is the worst in 100 years.

Climate scientists including Andrew King, at the University of Melbourne, have warned that climate change is making droughts worse in terms of severity, if not length.

The drought future fund is in addition to $1.8bn of drought assistance already provided by the federal government.