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World Bank Response to Hurricane Mitch
In October 1998, Hurricane Mitch devastated Central America, killing about 9,000 people, leaving over 1 million homeless, causing massive damage to social and economic infrastructure, and severely impacting the economies of affected countries.
The World Bank's response follows a three-pronged strategy involving assistance for:
In November, the World Bank immediately made available $200 million from existing projects to assist Honduras, Nicaragua, Guatemala, and El Salvador.
In December, the Bank announced that the International Development Association will increase its allocation of highly concessional resources to Honduras and Nicaragua to about $1 billion over the next four years to support reconstruction. Credits will be repayable over 40 years including a grace period of 10 years and only a 0.75 percent service charge.
Fast-track hurricane emergency operations have been approved for Honduras and Nicaragua. In December, a $200 million credit was approved for Honduras and a $50 million credit for Nicaragua to finance import costs associated with rebuilding social and economic infrastructure damaged by the hurricane.
The World Bank has also taken measures to assist hurricane-affected countries in dealing with their external debt obligations. In cooperation with the International Monetary Fund and the Inter-American Development Bank, the Bank established a Central America Emergency Trust Fund to which donor contributions are being channeled to help Honduras, Nicaragua, Guatemala, and El Salvador cover their multilateral debt service payments. As of March 1999, bilateral contributions exceeding $120 million had already been made or pledged to this Trust Fund, and payments are already being made to multilateral creditors on behalf of affected countries. Bank and Fund staffs and the country authorities are now working on preparing new debt sustainability analyses, which will be presented shortly to the Executive Boards.
Over the longer term, the World Bank Group will work closely with governments of affected countries and their partners—multilateral and bilateral donors and civil society—to review assistance requirements resulting from the hurricane emergency. While a major shift in assistance priorities is not expected, increased focus on infrastructure rehabilitation, financial systems, and private sector development is likely. The World Bank will also work closely with affected countries to help develop adequate disaster preparedness and management programs.
