An $8B cushion against financial shocks, natural disasters

Members of a disaster relief team after a devastating earthquake struck Port-au-Prince, Haiti in 2010. The Inter-American Development Bank will make available $8 billion to help countries in Latin America and the Carribean cope with external financial crises and natural disasters. Photo by: Sebastien Narcisse / IADB

A multilateral development bank has launched two new credit lines aimed at helping countries in Latin America and the Caribbean cope with two kinds of shocks: external financial crises and natural disasters.

The Inter-American Development Bank will make $6 billion available for its Development Sustainability Contingent Credit Line, which the board approved Thursday (Oct. 4). The credit line will replace IDB’s emergency lending facility worth $3 billion, according to a news release.

The new credit line is aimed at protecting country programs and policies that help poor people who are easily affected by changes in commodity prices, global liquidity crises and other external shocks. Each country could avail of up to $300 million or the equivalent of 2 percent of its gross domestic product from the credit line, “whichever is lower.”

The Contingent Credit Line for Natural Disasters, meanwhile, is meant for countries that suffered from a natural disaster. The money will help cover urgent financing needs “until other sources of funding can be accessed,” according to the news release.

It is not immediately clear if a state of emergency is required for a country to have access to the credit line, as in the case with the World Bank’s Catastrophe Deferred Drawdown Option. But it is designed to complement  not replace  IDB’s Contingent Credit Facility for Natural Disasters, which has a bigger limit per country. Countries can borrow $100 million or 1 percent ofGDP under the new credit line, while they can borrow as much as $300 million or 2 percent ofGDP from the credit facility.

Read more development aid news online, and subscribe to The Development Newswire to receive top international development headlines from the world’s leading donors, news sources and opinion leaders — emailed to you FREE every business day.

About the author

  • Jenny Lei Ravelo

    Jenny Lei Ravelo is a Devex Senior Reporter based in Manila. She covers global health, with a particular focus on the World Health Organization, and other development and humanitarian aid trends in Asia Pacific. Prior to Devex, she wrote for ABS-CBN, one of the largest broadcasting networks in the Philippines, and was a copy editor for various international scientific journals. She received her journalism degree from the University of Santo Tomas.