SPOTLIGHT

The Response to Ebola: Emergency Funding and a New Instrument

"Our membership has demonstrated great commitment in coming together to respond to the Ebola crisis. I am particularly gratified at the support for approving the new Catastrophe Containment and Relief Trust, which will make a difference to the people of Guinea, Liberia, and Sierra Leone—and other countries in the future."

—IMF Managing Director Christine Lagarde, February 5, 2015

IMF Approves $130 Million for Countries Worst Hit by Ebola

The Ebola outbreak in West Africa presented the international community with an unprecedented public health crisis. The spread of the pandemic through Guinea, Liberia, and Sierra Leone infected nearly 26,000 people and killed more than 10,600. It brought economic activity in the three countries virtually to a halt and raised the specter of a broader crisis.

The IMF response was rapid and flexible, committing about $404 million of financing that went directly to the governments of the three countries to meet the many new financing demands posed by Ebola. Emergency assistance was first provided on an accelerated basis in September 2014. Then, as the scale of the disaster became clear, the IMF augmented its assistance in early 2015 with additional financing under the Poverty Reduction and Growth Trust and debt relief under a new Catastrophe Containment and Relief Trust (CCRT).

Managing Director Christine Lagarde announced the additional financing in a proposal to the G20 Heads of State at their November 2014 Summit in Brisbane, Australia. By following up on the Brisbane proposal, the IMF became the first multilateral institution to deliver on 100 percent of its commitments to the Ebola-stricken countries.

The financial assistance to combat the epidemic fits within the IMF’s mandate to support its member countries with balanceof- payments support in times of economic and social stress. Each step of the response was carefully considered by the Executive Board, which approved all requests for financing and the creation of the CCRT by reforming the Post-Catastrophe Debt Relief Trust.

The Catastrophe Containment and Relief Trust

In February 2015 the IMF established a Catastrophe Containment and Relief Trust (CCRT). This instrument allows the IMF to provide grants for debt relief to the poorest and most vulnerable countries hit by catastrophic natural disasters or public health disasters, including epidemics. The new trust is intended to complement donor financing and the IMF’s concessional lending. The relief on debt service payments frees up additional resources to meet exceptional balance-of-payments needs created by the disaster, and for containment and recovery efforts.

The CCRT was created by transforming the Post-Catastrophe Debt Relief Trust, which was established in 2010 following the terrible earthquake in Haiti. The CCRT has two windows: (1) a Post-Catastrophe Relief window, to provide exceptional assistance in the wake of a natural disaster such as an earthquake or typhoon; and (2) a Catastrophe Containment window, to provide assistance in containing the spread of a public health disaster.

The introduction of a Catastrophe Containment window acknowledges that poor countries with weak health systems have limited capacity to contain the wider threat posed by a public health disaster, and that the international community has a strong interest in providing extensive support to such countries. Eligible low-income countries that are hit by public health disasters would receive up-front grants to immediately pay off upcoming debt service to the IMF. The amount of grant support is capped at 20 percent of a country’s quota, with additional debt relief possible under exceptional circumstances.

Assistance through the CCRT is available to 38 low-income developing countries that are eligible for concessional borrowing and that also have either a per capita income below $1,215 or, for small states with a population below 1.5 million, a per capita income below $2,430.

The Two Windows of CCRT

Post-Catastrophe Relief Window
Provides exceptional assistance in the wake of a natural disaster like an earthquake or typhoon.

Catastrophe Containment Window
Provides assistance in containing the spread of a public health disaster.

Concessional lending: The IMF provided $309 million of expedited assistance at zero interest rates to the three Ebolastricken countries. The lending was provided under the Rapid Credit Facility and Extended Credit Facility. The money was disbursed immediately, providing the countries with urgently needed resources to help tackle the crisis.

Debt relief: A unique feature of the IMF response was the decision to create the CCRT. The three Ebola-affected countries (Guinea, Liberia, and Sierra Leone) were provided with $95 million in grants for debt relief in FY2015 to ease pressures on their balance of payments.

Policy advice: After the epidemic hit, GDP contracted in all three countries. A key element of IMF policy advice was to support expansionary macroeconomic policies—including budget deficits to fight the epidemic and avoid an even larger recession. IMF staff interaction with the authorities of each country was maintained throughout the pandemic, and as the crisis began to abate, discussions turned to the longer-term challenge of rapidly restoring growth.