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.
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