The Executive Board of the International Monetary Fund (IMF) has stepped into the fight against the deadly Ebola virus, approving a total of US$130 million in emergency financial assistance to Liberia, Guinea and Sierra Leone, the three West African countries at the center of the epidemic.
The IMF is making its presence felt as the death toll from Ebola rises in the sub-region with seriously crippling economic impact. Liberia has announced that it would need about US$375 million dollars to fight the Ebola virus and restore its economy.
Finance Minister Amara Konneh told reporters Monday, September 29, that government’s development program crafted under the Agenda for Transformation (AfT) is under serious threat as it can no longer afford to finance most of the projects, due to the economic impact of the Ebola crisis. Budget revenue has already declined by about 20 percent.
According to the IMF, the US$130 million emergency financing arrangements amounts to 25 percent of each country’s quota at the IMF. The break down is as follows: for Liberia, the Executive Board approved a US$48.3 million augmentation of an existing arrangement under the ECF-the extended credit facility.
At this point Liberia is the country most affected by the epidemic, which has overwhelmed its capacity to respond. In addition to the heavy human toll, the outbreak is having a severe economic and social impact that could jeopardize gains from a decade of peace. Based on preliminary estimates, real GDP growth is projected to decline from 6 percent to 2.5 percent in 2014 as the key sectors of the economy, namely mining, services and agriculture, are all severely disrupted.
As for Guinea, the Board approved US$41.4 million under the Fund’s Rapid Credit Facility (RCF). The Ebola outbreak started in Guinea by end-2013 and intensified sharply from July, although it has been hit somewhat less hard than its neighbors. The country’s short-term economic outlook has deteriorated substantially, with 2014 growth expected to fall from a 4.5 percent projected at the beginning of the year to 2.4 percent. Guinea is making satisfactory progress under its existing arrangement under the Extended Credit Facility (ECF) but will receive emergency funding under the RCF arrangement because the most recent review under the ECF arrangement is pending.
Sierra Leone, for its part, will receive a US$39.8 million ECF augmentation. Ebola has spread to the entire country, severely affecting the social and economic fabric. Growth is slowing—from 11.3 percent to 8 percent this year. Based on the August estimate, inflationary pressures have intensified, and new balance of payments and fiscal financing needs have emerged.
The IMF Executive Board said it approved the financing on an accelerated emergency basis in order to help cover a substantial portion of the financing gap in the three countries, provisionally estimated to total some US$300 million that has emerged from the humanitarian crisis. The Fund recognized that these countries are grappling with the Ebola outbreak with fragile institutions and ill-equipped medical systems, and are facing substantial revenue shortfalls and additional spending needs to combat the outbreak.
“The involvement of the IMF in the crisis reflects the mounting macroeconomic impact of the crisis on countries that were making strides in overcoming years of fragility and instability. The additional financial assistance to help combat the epidemic fits within the Fund’s mandate to support its member countries in times of economic and social stress as they address balance of payments and fiscal financing needs,” the Fund said in a statement.
Growing economic impact
“The Ebola outbreak in Liberia, Guinea and Sierra Leone has already cost too many lives,” said IMF Managing Director Christine Lagarde.
“This humanitarian crisis could also have deep economic consequences. The governments of Liberia, Guinea and Sierra Leone requested IMF support to enhance their efforts to contain this unprecedented epidemic that is disproportionately affecting the most vulnerable in their populations. The IMF is working hard with the authorities of the affected countries and their development partners to ensure that the outbreak is quickly brought under control and to assist the economic rebuilding effort that must follow.”
“A health crisis of this magnitude inevitably will have a severe economic impact, and it is the responsibility of the IMF to assist countries to remain on their feet,” said Dr. Antoinette Sayeh, Director of the IMF African Department. “We are working closely with our counterparts in all three countries to provide the financing and advice that can make a difference in their struggle against Ebola,” the former Liberian Finance Minister added.
Infection Pace Quickens
The Ebola epidemic—a hemorrhagic fever that originates in wild animals—emerged in Guinea early this year and subsequently spread to neighboring Liberia and Sierra Leone. According to the World Health Organization (WHO), about 6,000 people are known to have been infected in the three countries (with a handful of cases in Nigeria and Senegal, where the virus now appears contained) and over 3,000 people have died.
However, the actual toll is likely to be higher, as there is evidence of substantial under-reporting of cases and deaths. Furthermore, the pace of infection has accelerated in recent weeks, particularly in Liberia and, to a lesser extent, in Sierra Leone.
The three affected countries have struggled to mount an effective defense against Ebola’s spread in large part because of extremely limited public health capabilities. An increasing number of international organizations have become involved, including the United Nations and WHO, the World Bank, the African Development Bank, and leading nongovernmental organizations such as Doctors without Borders and the Red Cross. Governments as well as private local and international donors also have committed significant resources.