Press Release: IMF Executive Board Approves US$8.2 Million in Emergency Assistance for St. Lucia
January 12, 2011Press Release No. 11/6
January 12, 2011
The Executive Board of the International Monetary Fund (IMF) today approved a combined SDR 5.36 million (about US$8.19 million) in emergency assistance for St. Lucia to cope with the economic consequences of Hurricane Tomas. The financial assistance consists of an SDR 3.83 million (about US$5.85 million) disbursement under the IMF’s Rapid Credit Facility (RCF), and SDR 1.53 million ( about US$2.34 million) under the Fund’s Emergency Natural Disaster Assistance (ENDA).
Hurricane Tomas struck St. Lucia on October 30, 2010 causing loss of life and significant damage to the nation’s road network, water supply, and agriculture sector. The latest but still preliminary estimates suggest that total damages amount to US$336 million, or about 34 percent of GDP.
Following the Executive Board discussion of St. Lucia, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, issued the following statement:
“St. Lucia has been severely affected by Hurricane Tomas, which caused loss of life and significant damages to infrastructure and agriculture. The reconstruction efforts are expected to have a significant fiscal and balance of payment impact, mainly in 2011, posing difficult policy challenges. It will be important to maintain macroeconomic stability and debt sustainability during the rehabilitation.
“Despite a temporary deterioration in the fiscal position, the authorities remain committed to the medium-term debt target. They intend to keep commercial borrowing to a minimum by limiting the financing of the rehabilitation and reconstruction efforts to available grants and external concessional financing. Key consolidation measures include introducing a market valuation-based property tax in early 2011 and a value-added tax by April 2012, and controlling the civil service wage bill over the medium term. A formal public sector investment program will also be initiated, to increase the efficiency of spending and underpinned by a medium-term expenditure framework.
“The authorities continue to make progress on other structural reforms. Efforts are ongoing to enhance the investment climate conducive to private sector growth, and to strengthen the oversight and resilience of the financial sector, including through the establishment of the Single Regulatory Unit.
“The authorities’ prudent management of the reconstruction efforts, together with the continued sound policies to enhance the fiscal position and address structural issues, will help St. Lucia maintain fiscal sustainability and achieve the medium-term debt target,” Mr. Portugal said.
Rapid Credit Facility
The RCF provides rapid concessional financial assistance with limited conditionality to low-income countries facing an urgent balance of payments need, such as those caused by natural disasters.
The RCF streamlines the Fund’s emergency assistance, provides significantly higher levels of concessionality, can be used flexibly in a wide range of circumstances, and places greater emphasis on the country’s poverty reduction and growth objectives. Financing under the RCF carries a zero interest rate, has a grace period of 5½ years, and a maturity of 10 years.
Emergency Natural Disaster 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, provided under the Emergency Natural Disaster Assistance (ENDA), meets 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. Emergency assistance loans are usually quick-disbursing and do not involve adherence to performance criteria.