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Factsheet - March 2008

IMF Emergency Assistance: Supporting Recovery from Natural Disasters and Armed Conflicts

When does the IMF provide emergency assistance?

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.

How emergency assistance is provided

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 will be able to benefit from this initiative, as will members that have previously received emergency assistance for natural disasters but have not yet fully repaid it. 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

Since 1995, the IMF has provided financial assistance to 12 countries for natural disaster emergency assistance, and to 14 countries for post-conflict emergency assistance, as shown in Tables 1 and 2.