Press Release: IMF Executive Board Approves US$157.5 million in Emergency Assistance for Sri Lanka
IMF News, March 4, 2005
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- Published: March 4, 2005
Approval and purpose
- The Executive Board of the International Monetary Fund (IMF) approved SDR 103.35 million (about US$157.5 million) in emergency assistance for Sri Lanka.
- The amount approved is available immediately to help the government deal with the devastating effect of the tsunami that struck the island on December 26, 2004.
- The IMF provides emergency assistance to member countries hit by natural disaster to help them meet immediate balance of payments financing needs, and maintain or restore macroeconomic stability.
Human toll and damages
- Human impact:
- 31,000 people dead
- 6,000 still missing
- hundreds of thousands displaced
- Sectoral damages:
- Commercial centers in the western part of the country were largely unaffected
- Fisheries and tourism sectors sustained severe damages
- Infrastructure replacement cost estimated at US$1.5-1.6 billion, or 7½ percent of GDP
Economic impact and projections
- Reconstruction will offset much of the impact on economic growth.
- GDP growth in 2005 is now estimated at 5¼ percent, the same level as in 2004.
- Rehabilitation expenditure will put a great strain on the balance of payment and the budget.
- Emerging gaps in 2005-2007 will need to be filled, in part, through support from the international community.
- Imports for relief and reconstruction will put pressure on international reserves.
Terms of the emergency assistance
- Repayment: eight equal quarterly installments over 3¼ to 5 years from the disbursement date.
- Rate of charge: subsidized to 0.5 percent per annum for PRGF-eligible countries hit by a natural disaster, subject to resource availability (See Public Information Notice No. 05/8).
IMF views, recommendations, and government actions (Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair)
- Immediate observations:
- The IMF extends its deepest sympathy to the people of Sri Lanka for the destruction, suffering, and loss of life caused by the tsunami of December 26.
- Repair and reconstruction effort will require at least three years of sustained effort.
- Commendation of government and international response:
- The government, with the support of the international community, responded swiftly, launching the national operations center to coordinate rescue and relief efforts.
- Follow-up measures include a grant scheme for affected individuals, a concessional loan program to assist small and medium enterprises, and development of a plan for rehabilitation and reconstruction.
- Policy and implementation guidance:
- Reconstruction should sustain economic growth around current levels, but imports for relief and reconstruction will pressure reserves.
- Support from the international community, including IMF emergency assistance, will be crucial for financing needed imports.
- Ensuring that pledged aid commitments from donors are effectively mobilized and efficiently used is crucial for success of reconstruction and recovery.
- Authorities should be mindful of limits to implementation capacity and potential inflationary pressures.
- Reassurance: the government intends to keep domestic financing of the budget at the pre-tsunami level and contain money growth.
- The government is working with stakeholders on a framework to monitor the disbursement and use of aid to enhance transparency and accountability.
- The government has indicated its intention to pursue steadfastly the medium-term reform agenda laid out in the 2005 budget, with priority given to fiscal sustainability.
- The authorities' commitment to macroeconomic stability, together with continued international support and timely delivery of appropriate international assistance, will be essential to help Sri Lanka recover.
Press Release: IMF Executive Board Approves US$157.5 million in Emergency Assistance for Sri Lanka — March 4, 2005