IMF Executive Board to enhance safety net for developing countries hit by large natural disasters
On May 5, 2017, the Executive Board of the International Monetary Fund (IMF) adopted proposals to enhance access of countries hit by large natural disasters to IMF financial support. These proposals, and the case for adopting them, are contained in the staff paper “Large Natural Disasters—Enhancing the Financial Safety Net for Developing Countries.”
The IMF’s Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) are available to provide financing to Fund members facing urgent balance of payment needs, including those stemming from natural disasters. The RCF and RFI are designed to play a catalytic role in mobilizing other external financing. Since 2000, the RCF, RFI, and their predecessor instruments have provided financing following 27 natural disaster events.
As discussed in an earlier staff paper, “Small States’ Resilience to Natural Disasters and Climate Change—Role for the IMF”, large natural disasters can result in immediate balance of payments needs that are large in relation to access limits under RCF and RFI. In a follow-up paper discussed by the Board on May 5, 2017 the Executive Board of the IMF endorsed a proposal to increase the annual access limit under the RCF and RFI from 37.5 to 60 percent of a member’s quota in the Fund. This would strengthen the Fund’s financial safety net for countries experiencing urgent balance of payments needs arising from large natural disasters, while helping to catalyze other sources of financing to meet such financing needs. A member would qualify for the higher access limit under the RCF and RFI where the urgent balance of payments needs stem from a natural disaster that occasions damages of at least 20 percent of the member’s GDP.