## ppea2021062

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---

### Executive Summary — Pandemic impact on fiscal accounts (2020)
- COVID-19 put significant pressures on fiscal accounts during 2020 through a contraction of revenues and increased spending needs.
- Beneficiaries spent on average 1.6 percent of GDP on COVID-related items in 2020 (calendar or fiscal year).
- On average, overall revenue declined by 2.4 percentage points of (pre-COVID budget/projected) 2020 GDP.
  - Tax revenue declined by 2.2 percentage points of GDP.
  - Grants increased by 0.2 percentage point of GDP.
- The overall fiscal deficit widened, on average, by 1.8 percentage points of GDP.
- Capital spending on average was cut by 1.1 percentage points of GDP (70 percent of beneficiaries saw declines).
- Current expenditure on average increased by 0.5 percentage point of GDP.
- Priority spending was on average higher than 2019 by about one percentage point of GDP.
- COVID-related spending composition (average shares in percentage points of GDP):
  - Prevention, containment and management: 0.5
  - Households: 0.4
  - Businesses, SOEs and government entities: 0.6

### DSSI scale and multilateral support
- DSSI debt service relief through end-June 2021: about $10.3 billion (including a national development bank participating as a private creditor) for 47 countries since May 2020.
- IMF disbursements to DSSI-eligible countries April 2020–June 2021: US$23 billion (US$19.6 billion in net transfers).
- World Bank committed US$52.4 billion in IBRD and IDA financing to DSSI-eligible countries over the same period; gross disbursements (IBRD, IDA, and RETF) amounted to US$31.1 billion, of which US$8.8 billion on grant terms (US$28 billion in net transfers).
- IFC support: US$4.9 billion in commitments and US$2.0 billion in disbursements (own account).
- Other MDBs: US$22.2 billion in commitments and US$17.7 billion in gross disbursements of COVID-19 related support to DSSI-eligible countries from April 2020 to May 2021.

### Fiscal responses and trade-offs (2020)
- Beneficiaries devoted substantial resources to tackle the COVID-19 crisis while facing limited fiscal space.
- Average overall increase in current spending (0.5 percentage point of GDP) is significantly below COVID-related spending (1.6 percent of GDP), implying substantial reprioritization of recurrent spending.
- About 60 percent of recipients reduced overall spending relative to the projection before the COVID-19 outbreak.
- Priority/social sector spending changes (percentage points of GDP, change from original 2020 projection/budget to 2020 outturn):
  - Priority/social sector spending: average 0.1, median 0.2, 25 percentile -0.3, 75 percentile 0.6.
- Education spending fell for about 70 percent of beneficiaries relative to pre-pandemic plans.
- COVID-related spending on prevention, containment, and management (0.5 percentage point of GDP) exceeded reported increase in health spending (0.2 percentage point of GDP), suggesting reprioritization within the health sector.

### Public debt outlook and drivers
- Many DSSI beneficiaries entered the COVID-19 crisis with high debt vulnerabilities which have continued to increase during the pandemic.
- Deterioration reflects widened fiscal deficits, lower economic growth, and sustained COVID-related spending needs.

### Fiscal response in 2020 and role of the DSSI (aggregate measures)
- COVID-related spending in 2020: 1.6 percentage points of GDP.
- Liquidity support from the DSSI in 2020: US$5.7 billion, about 0.5 percentage point of GDP.
- Other financing (IMF, WB, other MDBs, bilateral donors, and other new net borrowing) enabled countries to run larger deficits than envisaged before the pandemic: 1.8 percentage points of GDP.
- Aggregate contributions to support COVID-related spending in 2020 (simple average of 43 Phase 1 DSSI beneficiaries, change from pre-COVID projections, percentage points of GDP):
  - Tax revenue: -2.2
  - Grants: +0.2
  - Other revenues: -0.4
  - COVID-spending: +1.6
  - Non-COVID spending: -2.2
  - Fiscal deficit: +1.8

### Heterogeneity across beneficiaries and fiscal impacts
- Considerable heterogeneity in fiscal developments and responses across individual beneficiaries; skewed and fat-tailed distributions for some items.
- Key country circumstances affecting heterogeneity: economic structure, health system development, existing economic vulnerabilities, debt sustainability concerns, available financing, institutional capacity.
- Need for careful country-level assessment by teams to evaluate individual beneficiary cases.

### Projected fiscal efforts for 2021 (preliminary, April–June 2021 data)
- Sample: 43 Phase 2 beneficiaries (St. Vincent and the Grenadines excluded due to eruption; numbers normalized by the last pre-pandemic 2020 GDP projection).
- Overall projected change (2021 vs 2020 outturn, simple average):
  - Overall revenue: increase by 0.2 percentage point of GDP.
  - Overall spending: increase by 0.3 percentage point of GDP.
  - Fiscal balance: broadly unchanged relative to the 2020 outturn (on average).
- Within these averages:
  - Tax revenue projected to increase in 3/4 of recipients (on average by 0.2 percentage point of GDP), after ~80 percent of Phase 1 beneficiaries faced lower tax revenues than pre-pandemic projection.
  - Grants projected to decline.
  - Over 60 percent of recipients will increase capital spending (on average by 0.2 percentage point of GDP), after 70 percent reduced capital spending in 2020 compared to pre-pandemic 2020 projections (on average 1.1 percentage points of GDP lower than pre-pandemic projections).
  - COVID-related spending projected to be lower in 3/4 of beneficiaries in 2021 vs 2020.
- COVID-related spending 2021 projections (averages):
  - Projected to be lower than the 2020 outturn by 0.5 percentage point of GDP, but still sizeable at 1 percentage point of GDP.
  - Component changes (average):
    - Support to businesses, SOEs, and government entities: projected decline by 0.2 percentage point of GDP.
    - Prevention, containment, and management: projected to stay at 2020 level.
    - Support to households: projected to stay at 2020 level.
  - Wide quartile bands reflect heterogeneity in pandemic control, economic recovery, and spending needs.
- Revenue trends by group:
  - Over half of small state beneficiaries project lower non-grant revenue in 2021 vs 2020.
  - Only 20 percent of other beneficiaries project lower non-grant revenue.
  - Small state context: on average GDP contracted by nearly 10 percent (about 5½ percent, median) in small state DSSI beneficiaries in 2020 (based on April 2021 WEO); growth projection for 2021 is lower for small states than other beneficiaries (2.7 percent vs. 3 percent, on average; 3 percent vs. 3.4 percent, on median).

### Table 2 — Key summary statistics (Change from 2020 outturn to latest 2021 projections, in percentage points of 2020 GDP used for 2020 original projection/budget)
- Overall revenue:
  - Average: 0.2; Median: 0.6; 25 percentile: -0.5; 75 percentile: 1.9; Share of countries with lower revenue: 42%
- Tax revenue:
  - Average: 0.2; Median: 0.6; 25 percentile: -0.1; 75 percentile: 1.5; Share of countries with lower tax revenue: 28%
- Grants:
  - Average: -0.1; Median: 0.0; 25 percentile: -0.4; 75 percentile: 0.5; Share of countries with lower grants: 51%
- Other revenue:
  - Average: 0.1; Median: 0.0; 25 percentile: -0.3; 75 percentile: 0.2; Share of countries with lower other revenue: 60%
- Overall spending:
  - Average: 0.3; Median: 0.8; 25 percentile: -1.5; 75 percentile: 2.0; Share of countries with higher spending: 65%
- Current expenditure:
  - Average: 0.0; Median: 0.5; 25 percentile: -1.0; 75 percentile: 1.1; Share of countries with higher current expenditure: 58%
- Capital expenditure:
  - Average: 0.2; Median: 0.4; 25 percentile: -0.4; 75 percentile: 0.9; Share of countries with higher capital expenditure: 63%
- Priority/social sector spending:
  - Average: 0.1; Median: 0.1; 25 percentile: -0.4; 75 percentile: 0.6; Share of countries with higher priority/social sector spending: 59%
  - Health (of which): Average 0.0; Median 0.0; 25 percentile -0.2; 75 percentile 0.4; share 62%
  - Education (of which): Average 0.1; Median 0.1; 25 percentile 0.0; 75 percentile 0.3; share 65%
  - Social protection (of which): Average 0.0; Median 0.0; 25 percentile -0.1; 75 percentile 0.1; share 56%
- COVID-related spending:
  - Average: -0.5; Median: -0.4; 25 percentile: -1.1; 75 percentile: 0.2; Share of countries with lower COVID-related spending in 2021 vs 2020: 27%
  - Components (of which):
    - Prevention, containment, and management: Average 0.0; Median -0.1; 25 percentile -0.3; 75 percentile 0.2; share 41%
    - Households: Average 0.0; Median 0.0; 25 percentile -0.3; 75 percentile 0.2; share 28%
    - Businesses, SOEs, and government entities: Average -0.2; Median -0.1; 25 percentile -0.3; 75 percentile 0.0; share 31%

### Revenues, expenditures, and fiscal deficits in 2021 vs pre-COVID 2020 projections (Figure 2, simple average of 43 Phase 2 beneficiaries)
- Contributions (change from pre-COVID projections, percentage points of GDP):
  - Tax revenue: -2.1
  - Grants: +0.2
  - Other revenues: -0.3
  - COVID-spending: +1.1
  - Non-COVID spending: -1.4
  - Fiscal deficit: +1.9

### Liquidity needs, debt sustainability, and multilateral responses
- Liquidity needs expected to remain high in 2021 and 2022; debt sustainability outlooks have deteriorated further.
- IMF actions:
  - Reforming lending toolkit to flexibly support Low Income Countries during the pandemic and recovery (including Fund Concessional Financial Support for Low-Income Countries—Responding to the Pandemic).
  - Extending substantial financial assistance through emergency financing and IMF-supported programs.
  - Providing debt service relief via the Catastrophe Containment and Relief Trust (CCRT).
  - Exploring options to increase concessional lending capacity, including voluntary channeling of SDRs from members with strong external positions to countries most in need.
  - General SDR allocation implemented in late-August for an amount of about US$650 billion.
- World Bank / IDA actions:
  - Heavily frontloaded resources to respond to IDA countries’ pressing needs in FY21 and to support vaccination programs.
  - Advancing IDA20 replenishment.
- Policy urgency:
  - Effective and timely implementation of the Common Framework (CF) is urgent owing to expiration of the DSSI at the end of 2021 and increased fiscal pressures as countries restart debt service payments amid continued uncertainty.

### Downside risks and possible fiscal consequences
- Projections for 2021 are preliminary and subject to revision given uncertainty over the pandemic, containment measures, and economic recovery.
- If downside risks materialize, beneficiaries could face additional pressures through:
  - Additional spending needs and/or lower tax revenues.
  - Fiscal responses similar to 2020, including cutting domestically financed capital spending further (already below pre-pandemic projection), with potentially adverse impacts on long-term growth and recovery.
- April 2021 WEO cited downside risks including: pandemic resurgence, tighter financing conditions, extended scarring, intensified social unrest, increased frequency of natural disasters, and geopolitical, trade, and technology risks.

### Fiscal governance, transparency, and capacity development
- Expanded government roles to combat the pandemic increase opportunities for corruption and heighten the need for enhanced transparency and accountability in COVID-related spending.
- Countries receiving IMF and World Bank financing during the crisis commonly committed to governance measures to enhance accountability and transparency, including arrangements to track COVID-related spending.
- Typical commitments in authorities’ Letters of Intent include:
  - Publishing pandemic-related procurement contracts and beneficial ownership of companies awarded those contracts.
  - Publishing COVID-19 spending reports and pandemic spending audit results.
  - Tailoring measures to country circumstances and severity of corruption risks.
- IMF safeguards:
  - All countries receiving IMF emergency financing must commit to undertaking a “Safeguards Assessment” (unless recently completed) to provide reasonable assurance about central bank governance, reporting, and controls.
- Capacity development (CD) provided by IMF and World Bank during 2020–21:
  - IMF Fiscal Affairs Department provided fiscal CD support to 42 beneficiaries during 2020–21.
  - CD areas include: establishing emergency treasury procedures; strengthening public procurement; adapting and protecting internal control processes; ensuring timely financial reporting for policy actions; supporting accurate fiscal statistics reporting; supporting internal audit and Supreme Audit Institutions work.
  - CD helps authorities publish procurement information, collect and publish beneficial ownership information, undertake ex-post audits of COVID-related spending, and report on COVID-related spending.
- Monitoring implementation:
  - IMF survey and country Annex commentary provide preliminary snapshots of implementation status of committed governance measures.

### Appendices and additional material in the chapter
- Appendix I: DSSI Eligibility and Participation list (countries eligible and those requesting participation as of July 30, 2021).
- Appendix II: Distribution of main fiscal indicators, 2020 (histograms and distributions used to illustrate skewness and fat tails of fiscal item changes versus initial projections).

*Source: DSSI FISCAL MONITORING UPDATE (content provided in the supplied chapter).*

### Executive Summary

### Executive Summary

### Pandemic impact on fiscal accounts (2020)
- The COVID-19 pandemic put significant pressures on fiscal accounts during 2020 through a contraction of revenues and increased spending needs to tackle the pandemic and its economic fallout.
- On average, the beneficiaries spent 1.6 percent of GDP on COVID-related items in 2020 (calendar or fiscal year).
- On average, overall revenue declined by 2.4 percentage points of (pre-COVID budget/projected) 2020 GDP.
  - Tax revenue declined by 2.2 percentage points of GDP.
  - Grants increased by 0.2 percentage point of GDP.
- The overall fiscal deficit widened, on average, by 1.8 percentage points of GDP.
- Capital spending on average was cut by 1.1 percentage points of GDP (70 percent of beneficiaries saw declines).
- Current expenditure on average increased by 0.5 percentage point of GDP.
- Priority spending was on average higher than 2019 by about one percentage point of GDP.
- COVID-related spending composition (average shares in percentage points of GDP):
  - Prevention, containment and management: 0.5
  - Households: 0.4
  - Businesses, SOEs and government entities: 0.6

### DSSI scale and multilateral support
- The DSSI has provided about $10.3 billion (including a national development bank participating as a private creditor) in debt service relief through end-June 2021 for 47 countries since it became effective in May 2020.
- The IMF disbursed US$23 billion (US$19.6 billion in net transfers) to DSSI-eligible countries from April 2020 through June 2021.
- The World Bank committed US$52.4 billion in IBRD and IDA financing to DSSI-eligible countries over the same period; gross disbursements (IBRD, IDA, and RETF) amounted to US$31.1 billion, of which US$8.8 billion on grant terms (US$28 billion in net transfers).
- IFC support amounted to US$4.9 billion in commitments and US$2.0 billion in disbursements (own account).
- Other MDBs provided US$22.2 billion in commitments and US$17.7 billion in gross disbursements of COVID-19 related support to DSSI-eligible countries from April 2020 to May 2021.

### Fiscal responses and trade-offs (2020)
- Beneficiaries devoted substantial resources to tackle the COVID-19 crisis while facing limited fiscal space.
- The average overall increase in current spending (0.5 percentage point of GDP) is significantly below COVID-related spending (1.6 percent of GDP), implying substantial reprioritization of recurrent spending.
- About 60 percent of recipients reduced overall spending relative to the projection before the COVID-19 outbreak.
- Priority/social sector spending changes (median and percentiles reported in source table):
  - Priority/social sector spending: average 0.1, median 0.2, 25 percentile -0.3, 75 percentile 0.6 (values are in percentage points of GDP change from original 2020 projection/budget to 2020 outturn).
- Education spending fell for about 70 percent of beneficiaries relative to pre-pandemic plans.
- COVID-related spending on prevention, containment, and management (0.5 percentage point of GDP) exceeded the reported increase in health spending (0.2 percentage point of GDP), suggesting reprioritization within the health sector.

### Projections for 2021 and risks
- The efforts of DSSI beneficiaries in 2020 are expected to broadly continue in 2021 as beneficiaries incur health and economic costs while the pandemic continues.
- Submitted 2021 projections are very preliminary, with considerable uncertainty surrounding economic and fiscal prospects for the DSSI beneficiaries.
- Downside risks (e.g., pandemic intensification) could result in:
  - Lower revenues,
  - Higher COVID-related spending,
  - Lower capital expenditure,
  - Wider fiscal deficits than current projections.
- The DSSI expires at the end of 2021; effective and timely implementation of the Common Framework is urgent given increased fiscal pressures when countries re-start debt service payments amid continued uncertainty due to the coronavirus pandemic.

### Monitoring framework and data scope
- The IMF-World Bank DSSI Fiscal Monitoring Framework (endorsed by the G20 on June 23, 2020) reports:
  - Aggregate fiscal developments,
  - Debt data including overall debt service (domestic and external),
  - Priority spending aggregates (health, education, social protection),
  - COVID-related additional spending (items additional compared with preexisting support programs).
- The monitoring system uses countries’ own budget classifications and draws on integrated financial management information systems and PFM systems; priority spending and COVID-related spending are not generally comparable across countries.
- The analysis covers DSSI beneficiaries as of June 8, 2021; data and commentary were collected in April–June 2021.
- The report focuses on aggregate developments for 43 reporting beneficiaries that participated in Phase 1 and on the 43 beneficiaries that requested participation in Phase 2 (with specific notes on participation changes for certain countries).

### Fiscal governance, transparency, and capacity support
- DSSI beneficiaries are implementing measures to enhance accountability and transparency arrangements for COVID-related spending.
- Governance and anti-corruption measures were commitments under IMF arrangements (including emergency financing) and World Bank financing (including Development Policy Financing, COVID-19 related investment financing, and IDA’s Sustainable Development Financing Policy).
- The World Bank and IMF have provided capacity development support to strengthen Public Financial Management and other governance and anti-corruption reform.

*Prepared by the IMF’s Fiscal Affairs Department and the World Bank’s MTI; approved by Paolo Mauro (IMF) and Marcello Estevão (WB).*

### 9.      The public debt outlook in DSSI beneficiaries countries has also deteriorated owing to

### ppea2021062 - 9.      The public debt outlook in DSSI beneficiaries countries has also deteriorated owing to

### Public debt outlook and drivers
- Many DSSI beneficiaries entered the COVID-19 crisis with high debt vulnerabilities, which have continued to increase during the pandemic.
- The deterioration reflects:
  - widened fiscal deficits,
  - lower economic growth,
  - and sustained COVID-related spending needs.

### Fiscal response in 2020 and role of the DSSI
- COVID-related spending in 2020: 1.6 percentage points of GDP.
- Liquidity support from the DSSI in 2020: US$5.7 billion, about 0.5 percentage point of GDP.
- Other financing (IMF, WB, other MDBs, bilateral donors, and other new net borrowing) enabled countries to run larger deficits than envisaged before the pandemic: 1.8 percentage points of GDP.
- Figure 1 (simple average of 43 Phase 1 DSSI beneficiaries, change from pre-COVID projections, percentage points of GDP) — contributions to support COVID-related spending in 2020:
  - Tax revenue: -2.2
  - Grants: +0.2
  - Other revenues: -0.4
  - COVID-spending: +1.6
  - Non-COVID spending: -2.2
  - Fiscal deficit: +1.8

### Heterogeneity across beneficiaries and fiscal impacts
- Considerable heterogeneity in fiscal developments and responses across individual beneficiaries; skewed and fat-tailed distributions for some items.
- Key country circumstances affecting heterogeneity: economic structure, health system development, existing economic vulnerabilities, debt sustainability concerns, available financing, institutional capacity.
- Need for careful country-level assessment by teams to evaluate individual beneficiary cases.

### Projected fiscal efforts for 2021 (preliminary, April–June 2021 data)
- Sample: 43 Phase 2 beneficiaries (St. Vincent and the Grenadines excluded due to eruption; numbers normalized by the last pre-pandemic 2020 GDP projection).
- Overall projected change (2021 vs 2020 outturn):
  - Overall revenue: increase by 0.2 percentage point of GDP (simple average).
  - Overall spending: increase by 0.3 percentage point of GDP (simple average).
  - Fiscal balance: broadly unchanged relative to the 2020 outturn (on average).
- Within these averages, unwinding and divergence noted:
  - Tax revenue projected to increase in 3/4 of recipients (on average by 0.2 percentage point of GDP), after ~80 percent of Phase 1 beneficiaries faced lower tax revenues than pre-pandemic projection.
  - Grants projected to decline (offsetting some tax revenue increases).
  - Over 60 percent of recipients will increase capital spending (on average by 0.2 percentage point of GDP), after 70 percent reduced capital spending in 2020 compared to pre-pandemic 2020 projections (on average 1.1 percentage points of GDP lower than pre-pandemic projections).
  - COVID-related spending projected to be lower in 3/4 of beneficiaries in 2021 vs 2020.
- COVID-related spending 2021 projections:
  - On average projected to be lower than the 2020 outturn by 0.5 percentage point of GDP, but still sizeable at 1 percentage point of GDP.
  - Component changes (average):
    - Support to businesses, SOEs, and government entities: projected decline by 0.2 percentage point of GDP.
    - Prevention, containment, and management: projected to stay at 2020 level.
    - Support to households: projected to stay at 2020 level.
  - Wide quartile bands reflect heterogeneity in pandemic control, economic recovery, and spending needs.
- Revenue trends by group:
  - Over half of small state beneficiaries project lower non-grant revenue in 2021 vs 2020.
  - Only 20 percent of other beneficiaries project lower non-grant revenue.
  - Example context for small states: on average GDP contracted by nearly 10 percent (about 5½ percent, median) in small state DSSI beneficiaries in 2020 (based on April 2021 WEO); growth projection for 2021 is lower for small states than other beneficiaries (2.7 percent vs. 3 percent, on average; 3 percent vs. 3.4 percent, on median).

### Table 2 key summary statistics (Change from 2020 outturn to latest 2021 projections, in percentage points of 2020 GDP used for 2020 original projection/budget)
- Overall revenue:
  - Average: 0.2
  - Median: 0.6
  - 25 percentile: -0.5
  - 75 percentile: 1.9
  - Share of countries with lower revenue (higher spending in actual outturn than original): 42%
- Tax revenue:
  - Average: 0.2
  - Median: 0.6
  - 25 percentile: -0.1
  - 75 percentile: 1.5
  - Share of countries with lower tax revenue: 28%
- Grants:
  - Average: -0.1
  - Median: 0.0
  - 25 percentile: -0.4
  - 75 percentile: 0.5
  - Share of countries with lower grants: 51%
- Other revenue:
  - Average: 0.1
  - Median: 0.0
  - 25 percentile: -0.3
  - 75 percentile: 0.2
  - Share of countries with lower other revenue: 60%
- Overall spending:
  - Average: 0.3
  - Median: 0.8
  - 25 percentile: -1.5
  - 75 percentile: 2.0
  - Share of countries with higher spending: 65%
- Current expenditure:
  - Average: 0.0
  - Median: 0.5
  - 25 percentile: -1.0
  - 75 percentile: 1.1
  - Share of countries with higher current expenditure: 58%
- Capital expenditure:
  - Average: 0.2
  - Median: 0.4
  - 25 percentile: -0.4
  - 75 percentile: 0.9
  - Share of countries with higher capital expenditure: 63%
- Priority/social sector spending:
  - Average: 0.1
  - Median: 0.1
  - 25 percentile: -0.4
  - 75 percentile: 0.6
  - Share of countries with higher priority/social sector spending: 59%
  - Health (of which): Average 0.0, Median 0.0, 25 percentile -0.2, 75 percentile 0.4, share 62%
  - Education (of which): Average 0.1, Median 0.1, 25 percentile 0.0, 75 percentile 0.3, share 65%
  - Social protection (of which): Average 0.0, Median 0.0, 25 percentile -0.1, 75 percentile 0.1, share 56%
- COVID-related spending:
  - Average: -0.5
  - Median: -0.4
  - 25 percentile: -1.1
  - 75 percentile: 0.2
  - Share of countries with lower COVID-related spending in 2021 vs 2020: 27%
  - Components (of which):
    - Prevention, containment, and management: Average 0.0, Median -0.1, 25 percentile -0.3, 75 percentile 0.2, share 41%
    - Households: Average 0.0, Median 0.0, 25 percentile -0.3, 75 percentile 0.2, share 28%
    - Businesses, SOEs, and government entities: Average -0.2, Median -0.1, 25 percentile -0.3, 75 percentile 0.0, share 31%

### Revenues, expenditures, and fiscal deficits in 2021 vs pre-COVID 2020 projections (Figure 2, simple average of 43 Phase 2 beneficiaries)
- Contributions (change from pre-COVID projections, percentage points of GDP):
  - Tax revenue: -2.1
  - Grants: +0.2
  - Other revenues: -0.3
  - COVID-spending: +1.1
  - Non-COVID spending: -1.4
  - Fiscal deficit: +1.9

### Liquidity needs, debt sustainability, and multilateral responses
- Liquidity needs expected to remain high in 2021 and 2022; debt sustainability outlooks have deteriorated further.
- IMF actions:
  - Reforming lending toolkit to flexibly support Low Income Countries during the pandemic and recovery (including Fund Concessional Financial Support for Low-Income Countries—Responding to the Pandemic).
  - Extending substantial financial assistance through emergency financing and IMF-supported programs.
  - Providing debt service relief via the Catastrophe Containment and Relief Trust (CCRT).
  - Exploring options to increase concessional lending capacity, including voluntary channeling of SDRs from members with strong external positions to countries most in need.
  - General SDR allocation implemented in late-August for an amount of about US$650 billion.
- World Bank / IDA actions:
  - Heavily frontloaded resources to respond to IDA countries’ pressing needs in FY21 and to support vaccination programs.
  - Advancing IDA20 replenishment.
- Policy urgency:
  - Effective and timely implementation of the Common Framework (CF) is urgent owing to expiration of the DSSI at the end of 2021 and the increased fiscal pressures as countries restart debt service payments amid continued uncertainty.

### Downside risks and possible fiscal consequences
- Projections for 2021 are preliminary and subject to revision given uncertainty over the pandemic, containment measures, and economic recovery.
- If downside risks materialize, beneficiaries could face additional pressures through:
  - Additional spending needs and/or lower tax revenues.
  - Fiscal responses similar to 2020, including cutting domestically financed capital spending further (already below pre-pandemic projection), with potentially adverse impacts on long-term growth and recovery.
- April 2021 WEO cited downside risks including: pandemic resurgence, tighter financing conditions, extended scarring, intensified social unrest, increased frequency of natural disasters, and geopolitical, trade, and technology risks.

### Fiscal governance, transparency, and capacity development
- Expanded government roles to combat the pandemic increase opportunities for corruption and heighten the need for enhanced transparency and accountability in COVID-related spending.
- Countries receiving IMF and World Bank financing during the crisis commonly committed to governance measures to enhance accountability and transparency, including arrangements to track COVID-related spending.
- Typical commitments in authorities’ Letters of Intent include:
  - Publishing pandemic-related procurement contracts and beneficial ownership of companies awarded those contracts.
  - Publishing COVID-19 spending reports and pandemic spending audit results.
  - Tailoring measures to country circumstances and severity of corruption risks.
- IMF safeguards:
  - All countries receiving IMF emergency financing must commit to undertaking a “Safeguards Assessment” (unless recently completed) to provide reasonable assurance about central bank governance, reporting, and controls.
- Capacity development (CD) provided by IMF and World Bank during 2020–21:
  - IMF Fiscal Affairs Department provided fiscal CD support to 42 beneficiaries during 2020–21.
  - CD areas include: establishing emergency treasury procedures; strengthening public procurement; adapting and protecting internal control processes; ensuring timely financial reporting for policy actions; supporting accurate fiscal statistics reporting; supporting internal audit and Supreme Audit Institutions work.
  - CD helps authorities publish procurement information, collect and publish beneficial ownership information, undertake ex-post audits of COVID-related spending, and report on COVID-related spending.
- Monitoring implementation:
  - IMF survey and country Annex commentary provide preliminary snapshots of implementation status of committed governance measures.

### Appendices and additional material in the chapter
- Appendix I: DSSI Eligibility and Participation list (countries eligible and those requesting participation as of July 30, 2021).
- Appendix II: Distribution of main fiscal indicators, 2020 (histograms and distributions used to illustrate skewness and fat tails of fiscal item changes versus initial projections).

*Source: DSSI FISCAL MONITORING UPDATE (content provided in the supplied chapter).*

---


_Source: https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021062.pdf_