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How the IMF can help the Caribbean when disaster strikes


By Tao Zhang,
Deputy Managing Director, IMF

WASHINGTON – We are nearing the end of another tragic
hurricane season. The dead are being mourned, lives have been shattered, and
the arduous rebuilding has to begin. There is no question that recovering from
a major hurricane is a daunting task.

Overcoming the challenges posed by ever-more frequent
and severe hurricanes is a task no Caribbean country can accomplish alone.
Regional and international cooperation holds the key to secure a quick disaster
response, unlock much needed financing, and build a more resilient economy.

The purpose of the International Monetary Fund (IMF) is
to serve the demands of its members—all 189 countries. A major part of what we
do is to provide financing. We have a flexible lending toolkit to cater to the
demands of the membership. Some countries request financing to resolve an
imminent economic crisis; others turn to IMF financing to address more
protracted challenges that require tackling structural issues.

But what about countries that are hit by an external
shock like a natural disaster? A hurricane, for example, can throw a country
off its economic trajectory and quickly open sizeable financing needs to
reconstruct its economy. Fast and affordable financing is crucial, often to
address spending associated with the first response and rebuilding.

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In these situations, the membership can use the IMF’s
Emergency Assistance facilities. Almost all Caribbean countries are
shareholders of the IMF, and member countries can rely on IMF financing on
attractive terms.

Six countries in the region can access such financing
at concessional terms (zero-percent interest for the Rapid Credit Facility),
while the others can do the same at relatively low rates (for the Rapid
Financing Instrument). And more recently, the IMF increased the amount it lends
to countries for such emergencies. For example, Caribbean countries hit by
large natural disasters can borrow, on average, up to 2.2 percent of gross
domestic product (GDP) in a single transaction.

Most importantly, these emergency facilities are simple
to access, bear no policy conditionality, and are expedited for consideration
by the IMF’s Executive Board in a matter of weeks. For instance, in 2015
Dominica was able to receive financing from the IMF within two months following
tropical storm Erika. Once approved, the funds are fully disbursed immediately
with no additional monitoring.

Over the past five years, the IMF’s emergency
assistance helped fifteen countries overcome the effects of earthquakes
(Ecuador, Nepal), diseases (several African countries hit by Ebola)—and
hurricanes (Comoros, Dominica, Haiti, Mozambique, Vanuatu). In many, the IMF’s
financing played a critical role in the recovery and was catalytic in securing
broader support from the international community.

In striving to become a more agile institution ready to
meet the demands of its diverse membership, the IMF’s lending facilities have
also become more diverse. With climate change placing an increasing burden on
small economies, tackling its effect becomes a shared responsibility of the
global community, and the IMF will continue to do its part. We remain open to
partnering with all members to serve their needs, and to better prepare for
future hurricane seasons. (Reprinted from
Caricom Today)

The post How the IMF can help the Caribbean when disaster strikes appeared first on Antigua Observer Newspaper.

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