Press Release No. 15/264

Press Release: IMF Executive Board Approves US$23.8 Million in Financial Support for Vanuatu

June 8, 2015

On June 5, 2015, the Executive Board of the International Monetary Fund (IMF) approved financial support for Vanuatu as it rebuilds its economy after a devastating cyclone hit the country last March. The Board approved a disbursement of the equivalent of SDR8.5 million (about US$11.9 million or 50 percent of quota) under the Rapid Credit Facility (RCF)¹ and a purchase in the equivalent of SDR8.5 million under the Rapid Financing Instrument (RFI).²

Category-five Cyclone Pam struck Vanuatu on March 13, 2015. It took eleven lives, displaced a quarter of the population, and destroyed a large share of Vanuatu’s housing stock, infrastructure, tourist facilities, crops, and livestock. Estimated damage and losses to the economy exceed 60 percent of GDP.

At the conclusion of the Executive Board’s discussion, Mr. Min Zhu, Acting Chair and Deputy Managing Director issued the following Statement:

“The macroeconomic impact of Cyclone Pam on Vanuatu is estimated to be severe. The economy is likely to contract this year, and the trade deficit is expected to widen substantially.

“The main challenge in the short run is to secure sufficient resources from donors and international aid agencies for reconstruction and rehabilitation. The government should seek grant financing to the extent possible and seek synergies between the existing infrastructure pipeline and reconstruction needs. Once the recovery takes hold, the government should rebuild fiscal buffers.

“The disbursement under the Fund’s Rapid Credit Facility and the purchase under the Rapid Financing Instrument are intended to help Vanuatu cope with its immediate balance-of-payments needs and to catalyze critical donor support for the recovery.”

¹ The RCF provides rapid financial support in a single, up-front payout for low-income countries facing urgent financing needs. Financial assistance under the RCF is provided as an outright disbursement to Poverty Reduction and Growth Trust (PRGT)-eligible members that face an urgent balance of payments need, and where a full-fledged economic program is either not necessary or not feasible. Financing under the RCF carries a zero interest rate through 2016, has a grace period of 5½ years, and a final maturity of 10 years.

² The RFI is similar to the RCF and designed for situations where a full-fledged economic program is either not necessary or not feasible. Financial assistance provided under the RFI is subject to the same financing terms as the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL) and Stand-By Arrangements (SBA), and should be repaid within 3¼ to 5 years.