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Source: Inter-American Development Bank

The Inter-American Development Bank (IDB) has approved a $100 million contingency loan to finance a program launched by Uruguay to cushion the impact of natural disasters and health emergencies on its public finances. 

The operation completes this year’s special support program for Uruguay which, including disbursements and new credit instruments available, has exceeded the amount of $1.7 billion. The IDB’s support aims to uphold the country’s efforts to face the health emergency, with a special focus on the most vulnerable sectors, and jumpstart the economy by providing micro, small, and medium sized enterprises with access to credit.

The latest lending was approved under the Contingent Credit Facility for Natural Disaster and Public Health Emergencies (CCF), an innovative tool of the IDB to promote an integrated approach to the financial management of natural disasters and public health risks based on planning and pre-financing of contingent fiscal liabilities.      

The resources will be used to structure a stable, efficient, and rapid-access ex-ante financial coverage to meet extraordinary public spending needs during natural disaster and public health emergencies. 

Climate change is a phenomenon of particular relevance to Uruguay due to the increase of climatic shifts and the frequency and intensity of severe droughts, with their corresponding impacts on productivity, availability of water resources, and public health. In the face of this growing hazard, the operation includes financial coverage for droughts.

In addition, the operation contributes to improve the country’s integral disasters risk management by promoting improvements in the five strategic pillars of the Integrated Natural Disaster Risk Management Plan. These pillars are: governability and guiding framework development; risk identification and awareness; disaster risk reduction; emergency preparedness; and risk financial management. 

The potential beneficiaries are the entire population of Uruguay, in particular the affected populations that receive emergency assistance under the proposed coverage. The operation will also contribute to the cross-cutting issue of Gender Equality and Diversity by promoting the inclusion of a gender perspective in the country’s Disaster Risk Management.

The $100 million contingent IDB loan is for a 25-year term, with a 5.5-year period of grace and an interest rate based on LIBOR.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social, and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.

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