Ethiopia Steps Up Health Spending With Help From IMF Emergency Assistance

IMF News, May 6, 2020

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The IMF approved US$411 million in emergency assistance for Ethiopia to help fight the coronavirus pandemic.
The IMF approved Ethiopia’s request for a suspension of debt service payments of about US$12 million through October under the IMF's Catastrophe Containment and Relief Trust for poor countries.
Date on page: May 6, 2020.

The most direct economic impact so far has been on the service sector, particularly transport, travel, and hospitality services.
Passenger transport (both air and land) has been severely affected, which has shaken the hospitality industry resulting in closures of many big hotels.
The Jobs Creation Commission has estimated that close to 1.4 million workers will be affected by the pandemic, particularly in the service and manufacturing sectors.
Some industrial parks have already laid off workers due to a slump in global demand.
Disruptions in supply chains will affect the most vulnerable, especially those engaged in informal sectors, as their earnings and access to food will be severely affected.
As more people become infected, the impact on health resources and on the fiscal sector is expected to grow.

April 8, 2020: the federal government of Ethiopia declared a state of emergency, and several measures related to social distancing and city transport came into effect.
Fiscal Measures:
- A Birr 5bn (around $150 million) preliminary stimulus package
- The removal of import taxes on COVID-19 related items
- Faster value-added tax refunds for businesses
Monetary Measures:
- Birr 21bn (around $630 million) support for banks to address the expected liquidity shortage from expected lower deposits and loan collection, and to make available working capital for sectors impacted by the COVID-19 pandemic
- Priority access to foreign exchange importers and producers of COVID-19-related goods
- The raising of mobile money transfer limits
- The relaxing of the Central Bank’s non-performing loan directive to allow banks to reschedule loan payments for highly affected sectors like horticulture, hotels, and tourism among others
Sectoral Measures:
- The removal of minimum export flower prices
- Stronger enforcement measures against price gouging

Support importation of essential health supplies:
- Personal protective equipment (sanitizers, gloves, masks etc)
- Intensive care equipment like ventilators
- Communication on health issues and advocacy to ensure adherence to prevention recommendations
Ensure supply of essential goods for the vulnerable:
- Food items (like wheat and edible oil)
- Help those in extreme poverty have access to basic items to survive
Offset foreign exchange losses and enable the government to finance the importation of basic commodities including food and fuel.
Ease pressure on balance of payments that could arise from unplanned COVID-19-related imports.

Revive severely-affected sectors by providing low-cost lending and rescheduling loans to enterprises whose incomes have been severely affected.
Encourage spending by ensuring the supply of adequate liquidity to the financial system, supplemented by adequate foreign exchange resources to revitalize imports and exports.
Use fiscal incentives, such as tax relief, targeted to firms to strengthen their balance sheet and induce hiring to ease unemployment from business slowdowns in services and manufacturing.
Scale up existing rural and urban safety net programs to avoid an increase in the number of people sliding into absolute poverty.

Source: Ethiopia Steps Up Health Spending With Help From IMF Emergency Assistance (International Monetary Fund).