The Inter-American Development Bank (IDB) approved a $250 million contingent loan to boost Paraguay’s financial resilience to floods, forest fires, droughts, and any future epidemic or pandemic episodes. The operation will help the country access emergency funds to finance extraordinary public spending to assist the affected population.
The loan was approved under the Contingent Credit Facility for Natural Disaster and Public Health Emergencies (CCF), an innovative IDB tool to promote an integrated approach to the financial management of natural disasters and public health risks based on planning and anticipated financing of contingent fiscal liabilities.
Given the risks posed by climate change, this operation will be the first contingent loan under the CCF modality that includes an innovative parametric coverage for forest fires. In addition, due to the hazard of future epidemics and pandemics, this loan will also be the first to include coverage of public health risks.
The operation is structured as a $250 million, rapid access and cost effective ex ante financial facility under the CCF mechanism, with $150 million under Modality I for floods and forest fires, and $100 million under Modality II for eventual epidemics and pandemics.
Through this financial coverage, the country will have access to resources to tackle humanitarian assistance activities, public services rehabilitation, forest fires control and suppression, purchase of personal protection equipment, medicines, test kits, and other emergency response measures.
The contingent loan’s potential beneficiaries are the entire population of Paraguay, in particular the affected populations that receive emergency assistance under the proposed coverage.
The $250 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.
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.