Disaster-Triggered Financing Mechanisms Must Provide More Relief for Myanmar

By Kofi Gunu, Marina Zucker-Marques and Rishikesh Ram Bhandary

On March 28, 2025, Myanmar suffered a magnitude 7.7 earthquake, which caused devastating loss of life and property. Current reports put the death toll over 3,400, with 4,671 injured and 214 missing. As survivors continue to tally up the damage from this shock, this much is clear: Myanmar needs a considerable amount of short-term financial assistance now and, moving forward, billions of dollars more in reconstruction funding, most of which will have to come from abroad.

The Red Cross is seeking to raise $100 million for earthquake response in Myanmar. Several countries have already pledged a combined $34.6 million in emergency aid, with the largest contributions coming from China ($13.9 million) and the United Kingdom ($12.9 million). Many nations have also sent rescue teams, medical personnel and essential supplies to support immediate relief efforts.

But while this initial humanitarian response from foreign governments is commendable, international financial institutions (IFIs) like the World Bank and the International Monetary Fund (IMF) also have a role to play in supporting rebuilding efforts in Myanmar. In particular, these institutions can provide short-term financing that eases the fiscal stress on the country’s government, allowing it to import food and medicine, among other key supplies needed in times of natural disasters.

What disaster relief mechanisms already exist?

The World Bank and the IMF have two mechanisms for this very purpose. The first is Climate Resilient Debt Clauses (CRDCs), introduced by the World Bank to help developing countries deal with economic shocks due to natural disasters. They permit borrowers to defer principal and/or interest payments on World Bank loans for up to 2 years after a qualifying event. The second is the Fund’s Catastrophe Containment and Relief Trust (CCRT), which was established in 2015 during the Ebola outbreak in West Africa. The CCRT is the more recent iteration of an earlier fund—the Post-Catastrophe Debt Relief Trust (PCDR)—which was established in 2010 when Haiti was hit by a magnitude 7 earthquake, slightly less severe than the one that hit Myanmar in March. The Trust offers grants to help member states cover debt service owed to the IMF after catastrophic natural disasters or public health crises.

Together, CRDCs and the CCRT provide critical support to borrowing countries, giving them much needed breathing room and freeing up resources for what should be their first priority following a disaster: supporting their own populations. According to the World Bank International Debt Statistics database, in 2025, Myanmar is expected to pay $95 million to the World Bank (rising to $105 million in 2026) and $170 million to the IMF in debt service—almost three times more than what the Red Cross is hoping to raise in aid. Even temporary reprieve from these payments would be welcomed by policymakers in Naypyitaw.

What are their limitations?

However, the disaster in Myanmar highlights three key limitations of these mechanisms: (1) countries vulnerable to natural disasters are not well covered by their eligibility criteria; (2) the threshold for triggering support is too high and (3) they are not adequately funded to meet the growing demand on their resources.

The narrow eligibility window for CRDCs is emblematic of the first problem. The debt suspension is only available to “Small States”, an official designation that applies to countries with populations under 2.8 million people. Hence, a country like Myanmar—with a population of 55 million—is automatically excluded, regardless of its need and despite being a country with low per-capita income (just $1,190, in current US prices). This population-based restriction fails to account for the severity of disasters or the actual financial capacity of affected nations to respond.

The CCRT is similarly limited to only 30 low-income countries, but it also suffers from the second design flaw identified above. To be eligible for a debt relief grant, a country recovering from a natural disaster must have sustained damage exceeding 100 percent of its gross domestic product (GDP). This stringent condition disproportionately impacts vulnerable middle-income countries, where even a large natural disaster might represent a relatively small share of GDP.

With earthquake-related losses set to surpass the country’s annual economic output, Myanmar at least seems to meet the first obstacle to accessing the CCRT. The remaining problem, however, is that the Trust currently lacks the firepower to support countries in need. As of January 2025, the entire capitalization of the Trust stood at SDR 81 million (or $107 million). The bulk of its resources were used to support countries during the COVID-19 pandemic, and there has been no major fundraising drive since to replenish its coffers. In its current depleted state, the CCRT cannot fully support Myanmar—which would be eligible to receive up to $130 million in debt relief grants—let alone vulnerable countries generally.

What policies would greatly improve disaster support?

There is no doubt that the IFIs’ disaster-triggered financing mechanisms are overdue for serious overhaul. We provide three suggestions for strengthening their capacity to assist post-disaster reconstruction. First, the World Bank should implement automatic debt payment suspensions for countries experiencing major natural disasters, similar in design to CRDCs but with broader eligibility criteria. These suspensions would provide immediate fiscal space for emergency response to unforeseen natural disasters.

Second, the CCRT should apply to all 70 countries that are eligible for the Poverty Reduction and Growth Trust (PRGT), and IMF stakeholders should move urgently to bolster its resource-base. One way for the IMF to replenish the CCRT would be by selling off a small fraction of the 90.5 million ounces of gold it holds on its balance sheet, which is still registered by the Fund at historical cost of $45 per ounce. With gold prices at a new record of $3,177 per ounce, a modest gold sale would generate considerable revenues that could be used to build a more sustainable funding base for future disaster relief.

In March 2023, the price of gold was around $2,000 per ounce. This meant that the market value of the IMF’s gold stock rose from $181 billion to roughly $286 billion within just two years—and without the IMF taking any action. However, by sitting idle on its balance sheet, these gold assets accrue no interest, and they benefit no one. With gold prices driven up by global uncertainties, now is a strategic time to sell and use the proceeds as a built-in stabilizing feature for the IMF membership. The IMF could even take advantage of the current gold price surge to create a new endowment that would accrue interest over time and serve as a sustainable source of funding for subsidies—including the CCRT, but also interest subsidies for its concessional arm, the PRGT.

Finally, beyond the dedicated instruments discussed here, IFIs need to significantly enhance their wider capacity to help countries rebuild after catastrophic natural disasters. As the number of climate change-induced extreme weather events are poised to increase, the demand for these kinds of instruments will only grow. At the same time, the access of the most vulnerable countries to the Global Financial Safety Net (GFSN), a network of arrangements designed to support countries in need, is severely limited and mostly reliant on the IMF, whose support typically comes with austerity-driven adjustment programs most governments fear. To make up for these shortfalls, IFIs should increase lending, including for disaster recovery support, and expand financial support for balance of payments challenges that typically follow major disasters.

The tragic earthquake in Myanmar has highlighted significant gaps in the mechanisms IFIs have at their disposal to support countries dealing with natural disasters. These tools are neither well-designed nor adequately funded to assist countries when they are most in need of support. When the international community convenes in Seville, Spain this June for the Fourth International Conference on Financing for Development, the assembled governments are expected to agree on a common vision for the architecture of development finance. They have an opportunity to ensure that the international financial architecture works for all states—particularly those most vulnerable to severe, unanticipated acts of nature.

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