IMF approves emergency aid for Sri Lanka, Maldives after tsunami

Agence France-Presse, Washington

The International Monetary Fund said on Friday it had approved emergency aid for Sri Lanka and the Maldives to help the two countries to cope with the effects of the massive Dec. 26 tsunami.

The IMF said its executive board approved US$157.5 million for Sri Lanka and $6.3 million for the Maldives.

IMF deputy managing director Takatoshi Kato said both countries suffered steep human and economic losses.

In Sri Lanka, IMF officials noted, the cost of replacing the damaged infrastructure has been estimated at over $1.5 billion, or 7.5 percent of gross domestic product.

For the Maldives, the cost of reconstruction may be as high as 50 percent of GDP, according to some estimates.

The Sri Lanka government said this week it had received pledges of over $1 billion for tsunami relief, but only a small amount of that had been delivered. The government has said it needs more than $500 million in 2005 alone to pay for reconstruction.

A total of nearly 31,000 people were killed in the tsunamis which also left a million homeless along Sri Lanka's coastline.

IMF officials said commercial centers in the western part of the country were largely unaffected, but the fisheries and tourism sectors sustained severe damage.

Kato said the aid would help Sri Lanka meet the goals of its economic program.

"The government has indicated its intention to pursue steadfastly the medium-term reform agenda laid out in the 2005 budget," he said.

"The authorities commitment to macroeconomic stability, together with the continued support of the international community, will be essential to help Sri Lanka recover from this tragedy. Timely delivery of international support on appropriate terms will be essential to achieve this objective."

For the Maldives, Kato said the aid is part of an effort to revive what had been a strengthening economy.

"Before the tsunami hit, prospects for 2005 were bright. The economy was set to grow by around 6.5 percent, the fiscal deficit was modest, and international reserves were increasing," he said.

"However, the disaster will reduce economic growth to 1.0 percent, and create substantial financing gaps in the budget and the balance of payments .... The reconstruction needs are immense and the authorities need balance of payments and budget support to deal with the costs arising from the temporary decline in tourism."

The emergency assistance, at a subsidized interest rate of 0.5 percent, will be repaid in eight equal quarterly installments over three to five years from the disbursement date.