IMF Survey : Liberia Gets $36.5 Million From IMF’s New Trust for Disaster Recovery

IMF News, February 27, 2015

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Canonical URL: IMF Survey : Liberia Gets $36.5 Million From IMF’s New Trust for Disaster Recovery

IMF Executive Board approved $36.5 million in debt relief to Liberia as a grant from a newly established trust to help low-income countries recover from natural disasters.
The move aims to enhance Liberia’s international reserves and meet urgent balance of payments and fiscal needs resulting from the Ebola crisis.
Date of publication: February 27, 2015.

$36.5 million in debt relief provided as a grant from the new trust.
$45.6 million loan approved under the Rapid Credit Facility, a single, up-front payout for low-income countries facing urgent financing needs.
These measures are expected to:
- Improve Liberia’s reserve buildup to meet market demand for foreign exchange.
- Act as a catalyst for additional grant financing from other official and private sources.
Context of prior IMF support:
- Package draws on $100 million in debt relief funded by IMF grants announced earlier that month.
- Follows $130 million in emergency assistance disbursed in September 2014 to Guinea, Liberia, and Sierra Leone.
- On February 11, the IMF Board approved release of $25.9 million to Guinea under its IMF-backed program and boosted financing under that program by an extra $37.7 million.
- An ad hoc release of an additional $49 million in emergency financial assistance to Liberia was approved in September 2014 under its three-year Extended Credit Facility loan of $79.9 million (approved in November 2012), taking total funds available under the loan to about $130 million.

The new Catastrophe Containment and Relief Trust is a permanent feature of the IMF toolkit.
Purpose: make available grants to provide debt relief to eligible low-income countries recovering from a catastrophic natural disaster or seeking to contain the potentially catastrophic spread of a life-threatening epidemic within and across international borders.
Significance: first time the IMF has provided grants to support a country in containing an evolving natural disaster with international spillover effects.
The debt relief initiative and additional lending were outlined by IMF Managing Director Christine Lagarde in November 2014 in Brisbane, Australia to G-20 heads of state.

IMF staff projection: Liberia’s economy is projected to shrink by 1.4 percent in 2015 after barely growing in 2014.
Short-term policy challenge: containing the Ebola outbreak, which is having a deeper and stronger impact than previously anticipated.
Fiscal impact:
- Fiscal deficit is expanding to meet spending priorities associated with the epidemic.
- The fiscal year 2015 budget incorporates revenue losses and spending needs of about $200 million related to the Ebola outbreak.
- Donor financing is helping to finance the wider fiscal deficit.
Social impact:
- Poor and vulnerable population groups are being disproportionately affected; the report calls for deployment of emergency safety nets to address rising poverty and food insecurity.
Epidemiological outlook: incidence of new Ebola cases has declined recently but eradication will require more time and additional donor resources.
Financing recommendation: Liberia’s significant external and fiscal financing needs should be covered by grants to avoid worsening the country’s debt burden.

Source: IMF Survey, February 27, 2015.