IMF rapid response helps countries leverage more funds

Since 1962, the IMF has provided emergency assistance to member countries afflicted by natural disasters such as floods, earthquakes, hurricanes, or droughts. This assistance is aimed at meeting immediate foreign exchange financing needs arising from, e.g., shortfalls in export earnings and/or increased imports, and avoiding a serious depletion of external reserves.

In 1995, the IMF's policy on emergency assistance was expanded to cover countries in post-conflict situations. This assistance is limited to circumstances where a member with an urgent balance of payments need is unable to develop and implement a comprehensive economic program because its capacity has been damaged by a conflict, but where sufficient capacity for planning and policy implementation nevertheless exists. IMF financing can help a country directly and by catalyzing support from other sources, since Fund support must be part of a comprehensive international effort to address the aftermath of the conflict.

Rapid reaction and flexibility

Emergency assistance loans are usually quick-disbursing and do not involve adherence to performance criteria. An IMF member requesting emergency assistance is required to describe the general economic policies that it proposes to follow. In addition, a member requesting post-conflict assistance is expected to indicate its intent to develop a more detailed policy program under one of the Fund’s regular lending facilities.

Assistance has been typically limited to 25 percent of the member's quota in the IMF, although amounts up to 50 percent of quota can be and have been provided in certain circumstances. In March 2004, the Executive Board supported a proposal to extend emergency post-conflict assistance for up to three years, with access as much as 50 percent of quota, although no more than 25 percent of quota per year.

Emergency assistance loans are subject to the basic rate of charge, and should be repaid within 3¼ to 5 years. Since May 2001, for post-conflict cases which are eligible for the IMF’s Poverty Reduction and Growth Facility (PRGF), the interest rate on loans has been subsidized down to 0.5 percent per year, with the interest subsidies financed by grant contributions from bilateral donors. In January 2005, the Executive Board agreed to provide a similar subsidization of emergency assistance for natural disasters upon request of the member country. (Countries affected by the December 2004 tsunami in South Asia benefited from this initiative, as did members that had previously received emergency assistance for natural disasters but have not yet fully repaid it.) Under the Fund’s new package of reforms to help low-income countries, PRGF-eligible members will make zero interest payments on emergency assistance loans through January 2012 and pay a subsidized interest rate of 0.25 percent thereafter. PRGF-eligible countries may also request concessional financing under the Exogenous Shocks Facility to meet temporary balance of payment difficulties caused by external shocks, including natural disasters.

Policy advice, covering the full range of macroeconomic policies and supporting structural measures, is an essential component of IMF emergency assistance. In post-conflict cases, technical assistance is also very important for rebuilding the capacity to implement macroeconomic policy. Areas of focus include rebuilding statistical capacity and establishing and reorganizing fiscal, monetary, and exchange institutions to help restore tax and government expenditure capacity, payment, credit, and foreign exchange operations.

Countries that have received emergency assistance since 1995

IMF’s provision of financial assistance for natural disaster emergency assistance, and post-conflict emergency assistance, since 1995 is shown in Tables 1 and 2.

Table 1. Emergency Assistance Related to Natural Disasters, Since 1995

Country	Year	Event	Amount (U.S. $ million)	% of quota
Bangladesh	1998	Floods	138.2	25.0
Dominican Republic	1998	Hurricane	55.9	25.0
Haiti	1998	Hurricane	21.0	25.0
Honduras	1998	Hurricane	65.6	50.0
St. Kitts and Nevis	1998	Hurricane	2.3	25.0
Turkey	1999	Earthquake	501.0	37.5
Malawi	2002	Food Shortage	23.0	25.0
Grenada	2003	Hurricane	4.0	25.0
Grenada	2004	Hurricane	4.4	25.0
Maldives	2005	Tsunami	6.3	50.0
Sri Lanka	2005	Tsunami	158.4	25.0
Bangladesh	2008	Floods	217.7	25.0
Dominica	2008	Hurricane	3.3	25.0
Belize	2009	Floods	6.9	25.0
St. Kitts and Nevis	2009	Hurricane	3.4	25.0

Table 2: Post-Conflict Emergency Assistance, Since 1995

Country	Year	Amount (U.S. $ million)	% of quota
Bosnia and Herzegovina	1995	45.0	25.0
Rwanda	1997	12.2	15.0
Albania	1997	12.0	25.0
Rwanda	1997	8.1	10.0
Tajikistan	1997	10.1	12.5
Tajikistan	1998	10.0	12.5
Republic of Congo	1998	9.6	12.5
Sierra Leone	1998	16.0	15.0
Guinea-Bissau	1999	2.9	15.0
Sierra Leone	1999	21.4	15.0
Guinea-Bissau	2000	1.9	10.0
Sierra Leone	2000	13.3	10.0
Republic of Congo	2000	13.6	12.5
FR of Yugoslavia	2000	151.0	25.0
Burundi	2002	12.7	12.5
Burundi	2003	13.4	12.5
Central African Republic	2004	8.2	10.0
Iraq	2004	435.1	25.0
Haiti	2005	30.3	25.0
Central African Republic	2006	10.2	12.5
Lebanon	2007	76.8	25.0
Cote d’Ivoire	2007	62.2	12.5
Cote d’Ivoire	2008	66.2	12.5
Guinea-Bissau	2008	5.7	25.0
Lebanon	2008	37.6	12.5
Comoros	2008	1.7	12.5
Guinea-Bissau	2009	2.7	12.5