Following the devastating earthquake in Haiti in January 2010, the IMF established a Post-Catastrophe Debt Relief (PCDR) Trust that allows the Fund to join international debt relief efforts for very poor countries that are hit by the most catastrophic of natural disasters. Such debt relief is intended to free up additional resources to meet exceptional balance of payments needs created by the disaster and the recovery, complementing fresh donor financing and the Fund’s concessional liquidity support.
Purpose of the PCDR. In June 2010, the IMF established a Post-Catastrophe Debt Relief (PCDR) Trust that allows the Fund to join international debt relief efforts when poor countries are hit by the most catastrophic of natural disasters, such as the earthquake in Haiti in January 2010. The purpose of debt relief under the PCDR Trust is to free up additional resources to meet exceptional balance of payments needs that arise from such catastrophes and subsequent economic recovery efforts, complementing fresh donor assistance and the IMF’s concessional financing under the Poverty Reduction and Growth Trust (PRGT).
Eligibility. Assistance through the PCDR Trust is available to low-income countries eligible for concessional borrowing through the PRGT, whose per capita income is below the prevailing income threshold for accessing the World Bank’s most concessional lending from the International Development Association (IDA). For countries with a population below 1.5 million, per capita income must be below twice the IDA cut-off.
Qualification. PCDR support is limited to the most catastrophic of natural disasters, specifically those that have (i) directly affected at least one third of the population; and (ii) destroyed more than a quarter of the country’s productive capacity, as estimated by early indications such as destroyed structures and impact on key economic sectors and public institutions, or caused damage deemed to exceed 100 percent of GDP.
Debt flow relief. Eligible low-income countries that are hit by catastrophic disasters as defined above would receive debt flow relief on their debt service to the IMF falling due in the two years following the disaster.
Debt stock relief. Full cancellation of a country’s stock of debt to the IMF is also possible in cases where the disaster has created substantial and long-lasting balance of payments needs, and where the resources freed up by debt stock relief are critical for meeting these needs. This would typically only be the case if the country faced a very high debt burden. Debt stock relief would be conditional on concerted debt relief efforts by the country’s official creditors and availability of resources in the PCDR Trust.
Financing of the PCDR Trust. The Trust was initially financed by SDR 280 million (equivalent to around US$422 million) of the IMF’s own resources. Replenishment of the Trust will rely on donor contributions, as necessary.
PCDR-financed debt relief for Haiti. On July 21, 2010, the IMF Executive Board decided to provide SDR 178 million (equivalent to around US$268 million) in PCDR-financed debt stock relief to Haiti, eliminating Haiti’s entire outstanding debt to the IMF.