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Bank Unveils New Support for Hurricane Mitch Recovery

The World Bank last week announced that it would greatly increase its support for recovery efforts in Central American countries devastated by Hurricane Mitch.

"The World Bank is committed to helping these countries ensure that the real gains in peace and development achieved before Hurricane Mitch are not lost," World Bank Group President James Wolfensohn said at a meeting of Central American presidents and the donor community at the Inter-American Development Bank (IDB) headquarters in Washington. "The international community must continue to support the people and governments of Central America in overcoming the challenges they now face."

Experts are still measuring the extent of damage caused by Hurricane Mitch, which killed an estimated 9,000 people in Nicaragua, Honduras, Guatemala and El Salvador, displaced about one million people, and devastated roads, bridges, homes, electrical lines, crops and livestock. The damage in Honduras is estimated at $4 billion, in Nicaragua at $1 billion.

Wolfensohn conveyed his sorrow for the victims and survivors, and expressed his admiration for the "tremendous resilience and creativity of local communities."

"Recovery and reconstruction of the kind which Central America now faces can be led by governments," said Wolfensohn, "but it will ultimately depend on the creativity and active participation of local communities, the private sector, and civil society in general. I hope this approach will permeate the entire reconstruction effort."

The World Bank support package includes about $1 billion in new interest-free credits from the International Development Association (IDA) to Honduras and Nicaragua, the two most seriously affected countries.

El Salvador and Guatemala will also receive financing from the International Bank for Reconstruction and Development (IBRD) for hurricane-related recovery needs. Both support packages are in addition to $200 million made available to the four affected countries immediately after the emergency, by reprogramming ongoing operations.

The new IDA credits will help meet a variety of reconstruction needs, such as rebuilding schools, health clinics, roads, bridges, and other infrastructure. They will also address longer-term issues such as environmental management and measures to mitigate the effects of future natural disasters. The World Bank is also preparing Hurricane Emergency Projects for several countries to provide balance of payments support during 1999, when the economic impact of the disaster will be most severe. Together with the International Finance Corporation, the Bank will help these countries ensure that their private sectors can deal with the effects of the hurricane.

Wolfensohn said the Bank is setting up a new Central America Emergency Trust Fund to help Honduras, Nicaragua, El Salvador, and Guatemala meet their debt service on official publicly-guaranteed debt owed to multilateral institutions. Norway has already contributed to the Fund, and several other donors, including Spain, Italy, the United Kingdom, the Netherlands, Sweden, and Switzerland, have indicated their intention to contribute.

Wolfensohn said that the Bank, the International Monetary Fund and the IDB would be assessing Honduras' eligibility for debt relief under the Highly Indebted Poor Countries Initiative (HIPC), an agreement among official creditors designed to help the poorest, most heavily indebted countries reduce their level of debt to a sustainable level. He also announced that a local office will be set up in Tegucigalpa, Honduras, where staff are already providing technical support. For more information, call Lee Morrison at (202) 458-8741, e-mail lmorrison@worldbank.org, or Craig Mauro at (202) 473-0177, e-mail cmauro@worldbank.org.





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