IMF Executive Board Approves an Additional US$171.9 Million Disbursement Under the RCF to Madagascar to Address the COVID-19 Pandemic

IMF News, July 30, 2020

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IMF Executive Board Approves an Additional US$171.9 Million Disbursement Under the RCF to Madagascar to Address the COVID-19 Pandemic

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Bibliographic details

• Published: July 30, 2020

Disbursement details

• Disbursement amount approved: US$171.9 million (SDR122.2 million, 50 percent of quota).
• This is the second emergency disbursement under the Rapid Credit Facility (RCF).
• First disbursement: US$ 165.99 million approved on April 3, 2020.
• Total IMF COVID-19 emergency support to the Republic of Madagascar after this disbursement: US$337.9 million.
• The second disbursement was enabled by:
  • IMF Executive Board decision to double the annual access limit under the RCF to 100 percent of quota.
  • IMF Executive Board decision on a temporary modification to the Fund’s annual PRGT access limits.

Macroeconomic outlook and financing needs

• GDP projection for 2020: contract by 1 percent.
• Estimated financing gap arising from the pandemic: about US$580 million.
• Drivers of the weakened outlook: weaker external demand, increased spread of the pandemic, significant losses of revenue, and deepening impact of the COVID-19 pandemic.
• Fiscal effects: additional revenue losses and redirecting budget resources to address critical spending, including increased social assistance to the most vulnerable.

Use of funds and conditional commitments

• Purpose of RCF resources:
  • Finance urgent balance of payments and fiscal needs.
  • Finance health and economic relief spending under the government’s national contingency plan to fight the pandemic.
  • Support spending on health and social protection, and to support the most vulnerable.
  • Catalyze additional donor resources.
• Authorities’ commitments:
  • Transparency and accountability to ensure RCF resources are used appropriately and for their intended purpose.
  • Publication of procurement contracts related to the response to the pandemic.
  • Post-crisis audits.

Executive Board statement (Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair)

• Key points from the statement:
  • The COVID-19 pandemic continues to severely affect key sectors of Madagascar’s economy, including tourism and export-oriented manufacturing, further weakening the macroeconomic outlook.
  • Growth is projected to be negative in 2020 and urgent balance of payments needs arising from the pandemic have increased.
  • Additional emergency support under the RCF is expected to help finance health and economic relief spending, and continue to catalyze donor support.
  • In the context of a high degree of uncertainty, more support may be needed to ease the adjustment burden.
  • The authorities’ decision to apply for the Debt Service Suspension Initiative supported by the G-20 and Paris Club, and use of the released resources to finance spending on COVID-19 related health and economic relief, is welcome.
  • The authorities are implementing measures to address the humanitarian and economic impact of the pandemic while preserving macroeconomic stability. Measures include:
  • Strengthening the health system and social protection.
  • Supporting the private sector.
  • Preserving the stability of the financial sector.
  • Maintaining the flexible exchange rate regime.
  • Madagascar’s risk of public debt distress remains moderate, but risks to the outlook are substantial, underscoring the importance of preserving fiscal sustainability once the crisis abates.
  • The authorities remain committed, beyond their immediate response to the crisis, to continue reforms needed toward higher, more inclusive, and sustainable growth.

Practical/contact information (from release header)

• Press Release No.: 20/275
• Date: July 30, 2020
• IMF Communications Department — Media Relations
• Press officer: Lucie Mboto Fouda
• Phone: +1 202 623-7100
• Email: MEDIA@IMF.org
• Twitter: @IMFSpokesperson

Press Release No. 20/275, July 30, 2020 — IMF Communications Department.

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• Republic of Madagascar and the IMF
• Press Releases
• PRESS CENTER
• IMF Press Release No. 20/133
• IMF Press Release No. 20/267
• https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker
• https://www.imf.org/external/NP/SEC/bc/eng/index.aspx
• https://www.imf.org/en/home