Announcement of World Bank Approves IDA Emergency Credit for Rwanda Recovery on January 31, 1995

HOLD FOR RELEASE- World Bank 1818 H Street, N.W., Washington. D.C. 20433, U.S.A.* Telephone: k202) 477-1234 IDA NEWS RELEASE NO. 95/31 Contact: Al Drattell Tel No: (202) 473-1787 Eric Chinje Tel No: (202) 473-4467 Embargo: This press release describes an operation scheduled for discussion by the World Bank's Board on Tuesday, January 31. 1995. It is embargoed until after approval. A press advisory confirming the Board approval is expected to be issued sometime in the afternoon of January 31. Francisco Aguirre-Sacasa, Director, Central and Indian Ocean Department, which is responsible for World Bank activities in Rvanda, is available for interviews. You may call him directly at (202) 473-4380. WORLD BANK APPROVES IDA EMERGENCY CREDIT FOR RWANDA RECOVERY WASHINGTON, January 31, 1995 - The International Development Association today approved a S50 million credit to Rwanda to help finance the country's Emergency Recovery Program (ERP). The credit has encouraged other donors to pledge an additional $125 million to aid the Central African nation after civil strife has decimated the population, ravaged social services and destroyed the economy. "IDA, the World Bank's concessionary lending affiliate. will disburse the credit quickly," said Francisco Aguirre-Sacasa, director of the World Bank department responsible for the Bank's work in Rwanda. "Donor coordination in funding the emergency program has been an important element in preparing and implementing Rwanda's recovery program." The total aid package comes to $200 million, which includes $75 million from IDA ($50 million in the new credit and another $25 million from the restructuring of credits already in the pipeline). "All of the IDA funds will be disbursed in calendar year 1995," Aguirre-Sacasa added. The Bank convened two donor meetings in Paris in the past few months to begin the process of raising funds for Rwanda. With growing confidence in the new Rwandan government's commitment to national reconciliation, many donors have declared their readiness to participate. For instance, the United States, Belgium, Canada. the Netherlands, Norway and Switzerland provided funds to clear up Rwanda's arrears to the World Bank so the Bank could resume lending to the country. "more) Archives/Records Center, H B1-OO1 ( 1) 2 Other donors that have either committed or indicated a willingness to become part of the economic rescue effort are Germany, the European Union. United Nations Development Programme, and the African Development Bank. The International Monetary Fund (IMF) will also likely provide balance-of-payments support. Emergency Recovery Program (ERP) Financing Plan for 1995 The IDA money Amount Percent comes on the heels of a S20 (US$ millions) million grant the World DA: Bank provided last summer E genc Recovery Credit 50.0 to four United Nations PrjeRestruct 25.0 agencies involved in the Subtotal 75.0 Rwanda relief effort. O "Grants from the World Emgy u 100.0 Bank for relief purposes are Project resticturing 25.0 highly unusual," said Subtotal 125.0 62.5 Aguirre-Sacasa, "since we TOTAL 200.0 100.0 are not a relief agency. Hence, we funneled the funds to UNICEF, UN High Commissioner for Refugees (UNHCR), the Food and Agriculture Organization (FAO) and the World Health Organization (WIHO)." The objective of the grant was to help resettle displaced persons and refugees inside Rwanda. "The latest IDA credit carries this objective a step further," said Aguirre-Sacasa. It will provide funds for critical imports needed by the government and the private sector, and technical assistance to help implement reconstruction and re-establish basic government functions. "Rwanda now has a government." added Aguirre-Sacasa. "but virtually no administration. For instance, on average, only about a fifth of public sector professionals are currently at work, as most officials have either been killed or fled the country. The new government is devoid of financial resources. Rwanda has, in effect, a non-functioning economy. The civil war dealt a severe blow to the foundations of a narrow and fragile economy, badly battered even before this latest crisis. World Bank staff have estimated that real GDP declined by as much as 50 percent in 1994, which followed an 11 percent contraction in 1993 when GDP per capita was estimated at $195. Sectors such as agriculture, industry and finance were severely stricken. More than half of Rwanda's agricultural and industrial output has been lost, according to the World Bank, while most enterprises are not operating. Cash crops were particularly hard hit: for instance, only about 700 tons of coffee were exported in 1994: the annual average had been about 30.000 tons. No tea was exported in 1994. and almost all the tea plantations and processing plants were destroyed. At the same time, industry output is estimated to have dropped 60-80 percent. (more) 3 Foreign exchange reserves have vanished, coffee stocks have been stolen and the government can barely generate revenue. Damage to physical infrastructure such as roads and bridges has been relatively modest, but human losses have been huge. The country's institutional memory and project implementation capacity have been all but wiped out by the killings and disappearance of personnel, destruction of files, and theft of computers and equipment. Social services were cut sharply, with health and education being especially hard hit. Medical supplies, essential medicines and vehicles were stolen. medical centers were damaged and normal distribution channels broke down. Also, educational equipment was stolen and schools vandalized. Overall, the sharp decline in economic activity has intensified poverty in Rwanda. which ranked among Africa's poorest countries even before the crisis. The government recognized that national reconciliation is essential for the success of the recovery effort and for sustainability of donor support, according to Aguirre-Sacasa. Where The IDA Money Will Go (in millions of US Dollars) The IDA emergency . recovery credit aims at helping ^ Rwandans return to their normal icule 26.9 . lives and productive activities. The Heakh 6.0 2.0 credit is designed to (1) help the Edcaon 4.0 0 government begin the restoration of Energy key economic and social services, Infrasruc.ure4.9... rebuild the institutional capacity . aaiy2.808 necessary for sustainable economic Othe 1.4 * . recovery and design a coherent economic policy framework; and TOTA 50.0 2. (2) provide the private sector *includes funds to import vehicles and equipment to meet commercial and industry .needs as well as techmecal assistance and support to help the central bank. with the means to resume operations **To be identified. and create jobs. "This operation faces significant risks," Aguirre-Sacasa admitted. "The government. however, is committed to beginning the task of social reconstruction and to laying the groundwork for a modern, more efficient state and sound economic policies. But without strong international support. the chances of Rwanda recovering economically and socially are nil as is the likelihood of making Rwanda whole again." (more) 4 The IDA credit is for 40 years, including 10 years of grace; it carries no interest but has an annual charge of 0.75 percent on the disbursed balance and a variable charge of 0.5 percent (currently 0 percent) on the undisbursed balance. Note: IDA credits are denominated in SDRs (Special Drawing Rights), which are valued on the basis of a "basket" of currencies. The U.S. dollar equivalent of the SDR amount of the IDA credit reflects the exchange rates at the time of the negotiations of the credit. This IDA credit is for SDR 34.3 million, or $50 million equivalent. List of Imports to Be Financed under the IDA Credit Live animals for breeding Seed grains and fruits and spores for planting Oil and chemical oil products Sugar and industrial glucoses Petroleum coke, natural and other asphalts, industrial petroleum jelly and paraffin Inorganic chemical products Hydrocarbons and derivatives Pharmaceuticals, medicines Fertilizers Inks and toners Basic oils Artificial wax, powders and candles Chemical products, insecticides, herbicides, fungicides Plastic and cellulose products Rubber products (including pipes and cables, tires and surgical products) Wood and wood products Wood pulp, cellulose fibers and paper carton refuse Paper and paper products Books, textbooks, engineering and architectural drawing materials Cotton and jute fibers and textiles Synthetic fibers and textiles Ceramic products (including construction bricks, tiles, pipes, etc.) Glass and glass products Iron and steel products Copper and copper products Nickel and nickel products Aluminum and aluminum products Lead and lead products Zinc and zinc products Metal tools and instruments (more) 5 Motors and electrical machinery (gas generators, turbines, pumps, etc.) Motors and electrical machinery (power generators, transformers, bobbins, etc.) Telephones and radiophone equipment Motor cars, tractors, cycles, and other vehicles (including parts) Aeronautical and meteorological equipment Photocopiers, printers Topographical, geodesical and mathematical instruments Medical instruments Gas, liquid or electrical meters Medical and surgical furniture Prefabricated constructions Office equipment -0-