Catastrophe Containment and Relief Trust

April 15, 2020

The Catastrophe Containment and Relief Trust (CCRT) allows the IMF to provide grants for debt relief for the poorest and most vulnerable countries hit by catastrophic natural disasters or public health disasters. The relief on debt service payments frees up additional resources to meet exceptional balance of payments needs created by the disaster and for containment and recovery. Established in February 2015 during the Ebola outbreak and modified in March 2020 in response to the COVID-19 pandemic, CCRT grants complement donor financing and IMF concessional lending through the Poverty Reduction and Growth Trust (PRGT).

Purpose of the CCRT. In February 2015, the IMF transformed the Post-Catastrophe Debt Relief Trust to create the Catastrophe Containment and Relief Trust (CCRT), broadening the range of situations covered by IMF disaster assistance to include fast-spreading epidemics. In March 2020, the IMF adopted a set of reforms to the CCRT to enable the Fund to provide immediate debt service relief for its poorest and most vulnerable members affected by the current COVID-19 pandemic and any future pandemics. The trust provides grants to pay debt service owed to the IMF for eligible low-income  member countries that are hit by the most catastrophic of natural disasters or battling public health disasters—such as epidemics or global pandemics. The purpose of debt relief under the CCRT is to free up resources to meet exceptional balance of payments needs created by the disaster rather than having to assign those resources to debt service. 

Eligibility. Assistance through the CCRT is currently available to countries eligible for concessional borrowing through the Poverty Reduction and Growth Trust (PRGT) and whose per capita income is below the International Development Association’s (IDA) operational cutoff (currently US$1,175) or, for small states with a population of less than 1.5 million, per capita income below twice the IDA cutoff (currently US$2,350).

Structure. The CCRT has two windows: (i) a Catastrophe Containment window, to provide assistance in containing a public health disaster; and (ii) a Post-Catastrophe Relief window, to provide exceptional assistance in the wake of a catastrophic natural disaster. The windows have different purposes, qualification criteria, and assistance terms. 

Catastrophe Containment window:

  • Qualification. There are two alternative qualifying cases of public health disasters. The first concerns a life-threatening epidemic that has spread across several areas of the afflicted country, causing significant economic disruption, and has the capacity to spread or is already spreading to other countries. Significant economic disruption is defined by at least: (i) a cumulative loss of real GDP of 10 percent; or (ii) a cumulative loss of revenue and increase of expenditures equivalent to at least 10 percent of GDP. The second case concerns a life-threatening global pandemic that is inflicting severe economic disruption across the IMF membership and is creating balance of payments needs on such a scale as to warrant a concerted effort to support the poorest and most vulnerable countries through substantial additional grant support and debt service relief. To qualify for the support, the afflicted country should put in place appropriate macroeconomic policies to address the balance of payments needs.

  • Debt service relief. Eligible low-income countries that are hit by public health disasters as defined above may receive up-front grants for an initial tranche covering eligible debt falling due to the IMF within a period not exceeding six months. Additional tranches would be approved provided the CCRT has sufficient resources, for a period of up to two years from the date of the initial decision to grant relief.  

Post-Catastrophe Relief window: 

  • Qualification. A catastrophic natural disaster that has (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 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 CCRT.

Financing of the CCRT. The CCRT was initially financed with the balance of the earlier Post-Catastrophe Debt Relief Trust and accounts left over from the financing of the Multilateral Debt Relief Initiative. In response to the COVID-19 pandemic, the IMF has launched an urgent fundraising effort that would enable the CCRT to provide relief on debt service for the full two-year period, while leaving the CCRT adequately funded for future needs. This will require a commitment of about US$1.4 billion. 

Use of assistance from the CCRT. The initial relief for 25 eligible countries was approved on April 13, 2020. In earlier cases, three Ebola-afflicted countries (Guinea, Liberia, and Sierra Leone) received assistance from this trust close to US$100 million in February-March 2015. The previous Post-Catastrophe Debt Relief Trust was used to provide assistance to Haiti in July 2010 of about US$270 million, eliminating Haiti’s entire outstanding debt to the IMF.