WASHINGTON (CMC) – The International Monetary Fund (IMF) Wednesday said it was providing US$8.7 million for Dominica to be drawn from the Rapid Credit Facility (RCF) as the island rebuilds following the battering it took from Tropical Storm Erika in late August.

The RCF provides immediate financial assistance with limited conditionality to low-income countries with an urgent balance of payments need. Financing under the RCF carries a zero interest rate, has a grace period of 5.5 years, and a final maturity of 10 years. The Fund reviews the level of interest rates for all concessional facilities every two years.

“Dominica was hit by Tropical Storm Erika in August 2015, which resulted in significant loss of life and substantial damage to physical infrastructure. The Assessment Report by the World Bank and Government of Dominica estimates total damage and loss at US$483 million making this storm one of the worst natural disasters to ever strike the country,” said IMF deputy managing director Mitsuhiro Furusawa.

He said the recovery and rehabilitation costs will be substantial, putting tremendous pressure on already challenging fiscal and balance of payments positions.

“Fiscal policies will accommodate an increase in reconstruction spending over the medium term, expected to be mostly grant financed, while the underlying policies are being appropriately refocused from a supportive cyclical stance toward a medium-term consolidation objective.”

The IMF official said that the Dominican authorities have committed to generating robust primary surpluses over the medium term to ensure downward debt dynamics.

“They will tackle pressures on current spending, broaden the revenue base, strengthen tax collection, further re-prioritize capital expenditures, and step up efforts to strengthen the fiscal policy framework to ensure the sustainability of the fiscal adjustment effort.”

He said the authorities are also committed to strengthening financial policies to tackle regional and domestic vulnerabilities, both in terms of the health of financial institutions and their supervisory and regulatory frameworks.

But Furusawa said structural reforms remain critical to support the fiscal effort as well as to improve competitiveness and private-sector growth prospects.

He said reforms to build resilience to potential future natural disasters should also be stepped up.