Washington DC – A 7.8 magnitude earthquake struck Nepal, killing at least 1,500 people and prompting the government to declare a state of emergency. The tremor caused avalanches on Mount Everest and destroyed buildings across the capital city of Kathmandu. Nepal is one of the least developed countries in the world, ranking 145th out of 187 countries in the United Nations Human Development Index. Nepalowes $3.8 billion in debt to foreign lenders and spent $217 million repaying debt in 2013. Nepal is one of 38 countries eligible for assistance from the International Monetary Fund’s (IMF) new Catastrophe Containment and Relief Trust (CCR).
“Nepal could qualify for immediate relief,” said Eric LeCompte, executive director of the religious development coalition, Jubilee USA Network. “Nepal’s earthquake is why the International Monetary Fund created a new rapid response relief fund.”
The IMF created the CCR in February to provide debtrelief to poor countries impacted by natural disasters or health crises. The new fund canceled nearly $100 million in debt for Ebola-impacted countries. In order to qualify for relief from the new fund after a natural disaster, a country must meet certain criteria. The disaster must destroy more than 25% of the country’s “productive capacity,” impact one third of its people or cause damage greater than the size of the country’s economy. It is not yet known if Nepal will qualify.Nepal owes the IMF $54 million, with $10 million due in 2015 and nearly $13 million due in 2016.
“This new fund can provide urgent relief as Nepal struggles to recover,” noted LeCompte, who serves on expert groups to the United Nations that focus on debt.
The IMF asked governments to fund the CCR for future crises. The United Kingdom and Germany recently pledged $72 million in contributions. During the Spring IMF meetings, Austria, Portugal and Mexico also announced they would contribute $16 million more.
“Debt relief will help Nepal rebuild,” said LeCompte. “This crisis shows how important the IMF’s new fund is for some of the world’s least developed countries.”
In 2010, Jubilee USA moved the IMF to cancel Haiti’s debt after its earthquake and to create a new debtrelief fund for countries struck by disasters. Last Fall, Jubilee USA worked with the White House to urge the IMF to use that fund to cancel debt for Ebola-impacted Sierra Leone, Guinea and Liberia. In February, the IMF revised the previous debtrelief fund and expanded it to include countries impacted by health crises. It then announced $100 million in debtrelief for the three West African countries and called on governments to cancel $70 million more in Ebola-affected country debt.
Read about the Catastrophe Containment and Relief Trust.