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IMF Announces $260 Million Aid Package and a New Catastrophe Relief Fund for Ebola-Stricken Countries

The international financial organization has allocated a total of $160 million in loans to the countries hardest hit by Ebola, on top of $100 million coming in the form of grants secured through a new catastrophe relief trust.

by Samuel Oakford
Feb 5 2015, 8:40pm

Photo via Flickr

The IMF announced a $260 million aid package for Ebola ravaged countries Thursday, including $100 million in debt relief as part of new trust aimed at warding off economic shocks in the world's poorest countries.

In November, the countries of the G-20, who hold majority voting shares at the IMF, called on the global lender to extend aid to Sierra Leone, Liberia, and Guinea, the West African countries hardest hit by the Ebola virus outbreak. Each country faces budget shortfalls and the Ebola outbreak has taken a toll on various economic sectors, but they have all diligently paid loan installments to the IMF and other lenders throughout the crisis.

On Thursday, as part of the package, the IMF agreed to extend $160 million in loans to the countries, only three months after it lent an initial $130 million in September. Before these loans were announced, Liberia, Guinea, and Sierra Leone owed the IMF $334 million collectively. 

The remaining $100 million in grants announced today will originate from the Catastrophe Containment Relief Trust (CCR), a new fund established to support countries experiencing natural disasters ranging from rapidly spreading epidemics to earthquakes. Additionally, the IMF said it is attempting to facilitate further debt relief from other lenders.

The economies of Guinea, Liberia, and Sierra Leone have been wrecked by Ebola. Read more here.

Eric LeCompte, executive director of the debt forgiveness organization Jubilee USA, said he worked with US officials to push for at least $100 million in relief as part of that package. Though the eventual deal included significant loans, LeCompte told VICE News he was pleased to see the formation of a new fund that will distribute grants to poor countries dealing with disasters. The expanded catastrophe relief trust will be seeded with money from a separate relief pool established in the aftermath of Haiti's 2010 earthquake.

"What's really innovative is now we have a permanent debt relief facility to help countries when they experience shocks," said LeCompte. "Now there is a mechanism with clear rules in place for the world's least developed countries."

Still, LeCompte acknowledged, the trust will require further donations from wealthier countries. In a speech announcing the new trust, IMF Managing Director Christine Lagarde said she had "informally received indications" from one possible donor country regarding commitment to the CCR.

"I will be reaching out vigorously, including during the upcoming G-20 meeting in Istanbul, to get commitments of bilateral support for the CCR to meet future needs," said Lagarde.

In December, the Lancet medical journal found IMF policies played a role in weakening public health preparedness in Sierra Leone, Liberia, and Guinea, where the Ebola virus has killing nearly 9,000 and infected more than 20,000 since it first emerged in late 2013. The study, which looked at lending in the countries since 1990, found that IMF reforms "required reduction in government spending" and correlated with a decrease in community health workers.

IMF debts made the Ebola outbreak worse, report says. Read more here.

Responding to the journal's findings, the IMF said the study was "based on a misunderstanding, and, in some case, a misrepresentation, of IMF policies." The new grant facility, however, is a tacit acknowledgment that emergency lending, even on extremely generous terms, may not be the answer for countries with floundering economies facing public health or other types of crises.

"It is interesting that the IMF didn't choose to just make it about countries facing Ebola now, but a more general response to public health disasters," Aldo Caliari, director of the Rethinking Bretton Woods Project, told VICE News. Still, he said, there was a risk, particularly if the Ebola crisis ends this year, that donors might neglect the trust.

In its latest situation report, the World Health Organization reported the first rise in new Ebola cases during 2015. In the last week of January, there were 124 new cases, according to the agency, which has been criticized for what many perceive as a hapless early response to the outbreak.

Even if local officials may finally glimpse a light at the end of the tunnel, the cumulative toll of the virus will leave health care systems wracked for years to come.

In a statement, Abu Bakarr Kamara of Sierra Leone's Budget Accountability Network welcomed the relief but said only a full cancellation of the country's debt would ameliorate some of those concerns.

"The devastation caused by Ebola on our health system requires sustained and progressive investment in the health sector for the next five years," said Kamara. "Canceling all of Sierra Leone's debt would contribute greatly to improving our health systems."

The Jubilee Debt Campaign, a UK-based sister group of Jubilee USA, estimates that Sierra Leone will receive roughly $29 million in debt relief through the IMF trust by 2016. Thursday's decision came not a moment too soon for the government there. In December alone, Sierra Leone made nearly $5 million in debt payments to the IMF, even as it struggled to pay employees and handle a precipitous fall in revenues owing to Ebola.

According to LeCompte, what countries really need is a way to declare bankruptcy — a way to plead their case, like individuals and businesses do around the world when paying their way out simply isn't an option. In September, a majority of the UN General Assembly — where, unlike the IMF, countries have equal voting rights - approved such a mechanism, and deployed an ad-hoc committee to work out details.

LeCompte, who spoke to the committee this week, said American and European countries have refused to show up. "They believe these discussions should be happening at the IMF," he said.

Follow Samuel Oakford on Twitter: @SamuelOakford

Photo via Flickr