Why is the IMF setting up the Catastrophe Containment and Relief Trust?

• The Ebola pandemic in West Africa has presented the international community with an unprecedented 21^st century public health crisis. The humanitarian catastrophe hitting Guinea, Liberia and Sierra Leone demanded a rapid response that could tap new sources of financing.
• At the G-20 Heads of State meeting in Brisbane, Australia, in November 2014 the IMF outlined a plan to provide new loans and debt relief to the Ebola countries. It also called for approaches that could address similar crises in the future.
• The IMF has provided a combination of debt relief and new financing. The Catastrophe Containment and Relief Trust (CCR) provides grant assistance to immediately pay-off future debt service payments totaling $100 million for the three Ebola-hit countries. In addition, a second round of concessional loans amounting to about $160 million soon will be addressed by the Executive Board; those loans come on top of $130 of emergency lending provided last September.
• The new trust fund also is intended to help other Low Income Countries that may be affected by public health disasters in the future.

What is the purpose of debt relief under the CCR Trust?

• The objective is to reduce a country’s debt burden as it battles an epidemic of infectious disease—in this case the three Ebola-stricken countries. The IMF lends to low-income countries at zero interest rates through its regular concessional facilities, but that money must be repaid.
• The purpose of the grants under the CCR Trust is to limit that debt burden, freeing up resources to respond to the crisis rather than having to assign those resources to debt service.
• The CCR represents an enhancement of the Post Catastrophe Debt Relief Trust (PCDR), which was set up in 2010 in response to the earthquake that devastated Haiti. The CCR is intended to broaden the situations covered by IMF disaster assistance to include epidemics.

How will debt relief work under the CCR Trust?

• Countries will be eligible if they are experiencing a life-threatening epidemic that is causing significant economic disruption and creating a balance of payments need, and where the epidemic has shown the capacity to spread rapidly within the country and across borders. The potential or fact of “spillovers” is a crucial reason for creation of the Trust.
• The IMF will draw upon assessments made by national governments, the World Health Organization, the World Bank and other relevant agencies.
• Countries seeking debt relief will need to provide a letter of intent outlining the nature and impact of the public health disaster; explain how they are responding to the crisis; and outline macroeconomic policies taken to address balance of payments problems. Policy commitments under the letter of intent will be reviewed in the context of subsequent Article IV consultations, additional requests for financial assistance or completion of the review of an existing program.

How much debt relief will countries be eligible to receive?

• The debt relief grants will be used to immediately cancel debt service coming due to the Fund equivalent to some 20 percent of quota.

How much debt relief will the three Ebola-hit countries receive?

• The debt relief provided to the three Ebola-hit countries will total about $100 million. With approval of the CCR Trust, the countries will be eligible to apply for the debt relief immediately. Their applications for debt relief will come within the context of their requests for augmentations of the lending that they are receiving from the IMF, or, in the case of Guinea, assistance under the Rapid Credit Facility.

What is the status of IMF lending to the three Ebola-hit countries?

• The three countries received a total of $130 million of assistance in September 2014.
• Guinea received $41.4 million under the Rapid Credit Facility (RCF);
• Liberia received $48.3 million as an augmentation of its existing arrangement under the Extended Credit Facility (ECF);
• Sierra Leone received $39.8 million as an augmentation to its ECF arrangement.
• The three countries now are seeking additional augmentations from the Fund, or funds from the Rapid Credit Facility, totaling about $160 million. The IMF Executive Board is scheduled to address these requests later this month.

How do the CCR and increased lending to the Ebola-hit countries respond to the G-20 plan for an additional $300 million in resources to those countries?

• The CCR will provide those countries with about $100 million of debt relief, as outlined to the G-20.
• The Fund plans about $160 million of increased lending, as outlined to the G-20.
• The third leg of the Fund’s approach is a call on the official bilateral creditors of the three countries to provide relief on debt service payments over a two-year period.

Does debt relief under the CCR represent 100 percent debt relief?

• The amount of debt relief provided under the CCR represents 20 percent of a country’s quota; the policy allows for the provision of higher amounts of assistance under exceptional circumstances.
• In the case of Sierra Leone, this amount will almost cover debt service payments to the IMF over the next two years; for Liberia and Guinea, this amount will cover debt service payments due for the next two years and beyond.

Does the CCR Relief to the Ebola countries include debt stock relief?

• The Ebola countries receive concessional loans that carry a zero interest rate, so all debt relief grants in effect entail a writing down of the debt stock.

Why is the IMF not providing 100 percent debt relief, as it did in 2010 after the earthquake in Haiti?

• Under the original PCDR set up in response to the Haiti earthquake, debt relief was provided in two parts: a) two years of relief on debt service; and b) full debt relief as part of a concerted international operation by the country’s official creditors to provide debt stock relief. The concerted international operation to clear Haiti’s debt stock reflected the scale of the damage inflicted by the earthquake, which was of a truly catastrophic dimension.
• The CCR provides for exceptional cases where larger amounts of debt relief may be provided, based upon consultation with our Executive Board.

How will the CCR Trust be financed?

• There will be two core sources initially:
• The existing PCDR Trust will be folded into the CCR, representing about SDR 102 million (about $150 million).
• Accounts left over from the financing of the MDRI Initiative—the debt relief effort for low-income countries under the HIPC process that has now largely been completed—will also be included, representing about SDR 52 million (close to $75 million). This will require the agreement of donor countries, which the IMF now is seeking.
• While the resources from the PCDR Trust will enable the IMF to meet the needs of debt relief for Guinea, Liberia and Sierra Leone, there will be a need for additional financing to address future public health crises.
• The IMF estimates that about $150 million will be needed for the longer-term effort, and the membership is being asked to provide that funding through bilateral grants. That will build up the balance in the trust fund to the required level.