Press Release: IMF Executive Board Approves US$3.3 Million in Emergency Assistance for Dominica
February 5, 2008Press Release No. 08/19
The Executive Board of the International Monetary Fund (IMF) approved on February 4, 2008, SDR 2.05 million (about US$3.3 million) in emergency assistance for Dominica. This amount is available immediately to help the government deal with the effects of Hurricane Dean, which struck Dominica in August 2007.
The damage caused by Hurricane Dean is estimated at almost 20 percent of GDP. The agriculture sector, one of the major sources of foreign exchange earnings, took the brunt of the damage. Economic growth is estimated to have slowed to around 1 percent in 2007 from a pre-hurricane forecast of 3 percent growth, while the loss in export earnings in 2007 and 2008 is estimated at 4 percent of GDP. The donor community has responded by providing disaster relief grants to help address the immediate needs of those affected by the hurricane, and to undertake repair and reconstruction of essential infrastructure. However, given the severity of structural damage, the reconstruction process will require a considerable amount of time and resources, and is likely to be limited by implementation capacity.
The IMF provides emergency assistance to member countries affected by natural disasters to help them meet immediate balance of payments financing needs, and maintain or restore macroeconomic stability. The emergency loan, has a subsidized interest rate of 0.5 percent per year, and will be repaid in eight equal quarterly installments over 3.25 to 5 years from the disbursement date
At the conclusion of the Executive Board's discussion on Dominica, Murilo Portugal, Deputy Managing Director and Acting Chair, said:
"The IMF extends its deepest sympathy to the people of Dominica at this difficult time. The extensive damage caused by Hurricane Dean has resulted in great hardship for many Dominicans, and constitutes a serious setback to recent economic progress. Prior to the hurricane, Dominica had significantly reduced fiscal imbalances under an economic program supported by the Poverty Reduction and Growth Facility (PRGF), which had helped reduce the external current account deficit and placed the public debt on a downward path. However, with foreign exchange earnings impaired by the hurricane and significantly expanded imports of reconstruction materials, Dominica now faces large balance of payments financing needs.
"The government has responded swiftly, reallocating resources to the pressing needs of rehabilitation and reconstruction. Generous support from the international community, together with emergency assistance from the IMF, will help address near-term priorities. The authorities are committed to pursuing a comprehensive medium-term economic strategy to support the reconstruction effort and foster economic growth. This approach, based on the country's Growth and Social Protection Strategy, aims at maintaining macroeconomic stability and promoting structural reforms, and includes measures to strengthen further the financial sector.
"The authorities plan to maintain the primary surplus target of 3 percent of GDP, financing reconstruction expenditure primarily through external grants. They intend to continue with the planned multiyear income tax reform at a pace consistent with their fiscal targets, while maintaining the integrity of the recently-implemented VAT.
"The authorities' continued implementation of prudent policies, together with support from the international community, should help Dominica recover from the setbacks caused by the hurricane." Mr. Portugal said.