Calculating cost of the tsunami

• Author: Conny Lotze
• Position: IMF External Relations Department
• Pages: 1-4

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The December 26 tsunami in the Indian Ocean killed more than 226,000 people, left millions homeless, and ravaged coastlines in a dozen countries. Anti-poverty programs in the region could suffer serious setbacks. The IMF is assessing the financial demands the disaster will make on the affected countries and is discussing with governments what assistance the IMF can provide to help alleviate the burden.

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IMF focuses on financing needs after devastating tsunami

The IMF is working with governments and other international agencies to assess the financing needs for reconstruction in the areas devastated by the December 26 tsunami in the Indian Ocean, which killed more than 226,000 people and ravaged coastlines in a dozen countries. The full economic impact in the most affected countries-Indonesia, Sri Lanka, the Maldives, Thailand, and India-is still being calculated. The IMF has offered emergency assistance on the order of $1 billion (see box) and has sent teams to the region to evaluate financing and support needs in individual countries. "The ways in which we can help include providing advice and technical assistance in assessing the macroeconomic impact and budgetary and balance of payments needs," said IMF Managing Director Rodrigo de Rato, who toured the worst-hit region of Aceh in northern Sumatra on January 7. Afterward de Rato said little could have prepared him for the visit to Aceh. "Entire cities and towns, and the lives lived in them, were simply washed away," he said.

The Asian Development Bank (ADB) said in a report that the tsunami had set back poverty reduction programs in the region and could thrust an additional two million people below the poverty line. "The poverty impact of the tsunami will be enormous," said Ifzal Ali, Chief Economist with the Manila-based multilateral development bank. "Poverty is potentially the most important effect of this natural disaster."

De Rato and later First Deputy Managing Director Anne Krueger visited some of the affected countries to meet with government leaders and discuss IMF assistance. Meanwhile at headquarters, IMF staff personally had donated more than $130,000 by January 18, which the institution pledged to match. In Indonesia, De Rato attended on January 6 the Special ASEAN Leaders'Meeting on the Aftermath of the Earthquake and Tsunamis, and met with regional and international leaders, including UN...