The Executive Board of the International Monetary Fund (IMF) approved the disbursement of $171.9 million to the Republic of Madagascar under the Rapid Credit Facility (RCF).
This is the second emergency disbursement to Madagascar after the IMF approved $ 165.99 million on April 3, 2020, bringing the total IMF COVID-19 support to Madagascar to $337.9 million. This fund will help finance the country’s urgent balance of payments and fiscal needs.
Since the approval of the first Rapid Credit Facility, the economic outlook of Madagascar has worsened due to a further deterioration of the global environment and a deepening of the impact of the COVID-19 pandemic, with the 2020 GDP now projected to contract by one per cent.
The financing gap is now estimated at about $580 million due to an increase in urgent balance of payments needs arising from the pandemic. Revenue losses and redirecting budget resources to address critical spending including increased social assistance to the most vulnerable has severely affected the fiscal situation.
Under the government of Madagascar national contingency plan to fight the pandemic and continue to catalyze further support from donors, the additional disbursement will help finance health and economic relief spending.
“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 Rapid Credit Facility, following a first disbursement approved on April 3, 2020, is expected to help finance health and economic relief spending, and continue to catalyze donor support.” Said Ms Antoinette Sayeh, Deputy Managing Director and Acting Chair.
She also added that the authorities have committed to enhancing transparency to ensure that the financing provided is efficiently spent on addressing the crisis.
“Madagascar’s risk of public debt distress remains moderate, but risks to the outlook are substantial. This underscores 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.”
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