The International Monetary Fund (IMF) Executive Board approved $165.99 million to help the Republic of Madagascar to address the urgent balance of payment that needs stemming from the outbreak of the COVID-19 pandemic.
The funds were under the Rapid Credit Facility (RCF). RCF provides rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need.
Madagascar’s economy has largely been affected by the coronavirus pandemic with the country’s tourism dramatically declining, trade and investments declining as well as interferences in the manufacturing and mining exports.
The government of Madagascar is taking immediate actions to mitigate the shock of the COVID-19 pandemic by putting immediate fiscal measures to strengthen social protection and support the most vulnerable in society.
Suspension of fees and social contributions to aid the private sector in the country, donating staple food and also providing liquidity to preserve the stability of the financial sector has been done by Madagascar’s government.
Madagascar’s urgent external and fiscal financing needs have been created by the weakening macroeconomic outlook and declining fiscal situation. The International Monetary Fund support will help the country fill immediate external needs and preserve fiscal space for essential coronavirus related health expenditure. The fund is also expected to help speed up more donor support.
“The COVID-19 pandemic is having a severe impact on Madagascar’s economy. Due to dramatic declines in tourism and disruptions to manufacturing and extractive industry exports, as well as transport, communications, and services, real GDP growth is likely to decline sharply. The fiscal situation is also deteriorating rapidly with additional health and social spending outlays and a significant shortfall in tax revenue. Fund support under the Rapid Credit Facility will help the authorities meet the urgent fiscal and external financing needs to mitigate the impact of the pandemic.” Said Mr Mitsuhiro Furusawa, Deputy Managing Director and Chair IMF.
Despite the substantial risks to the outlook, Madagascar continues to be assessed at low risk of external debt distress due to high uncertainty.
Mr Furusawa also added that authorities are taking immediate measures to address the economic and human impact of the COVID-19 pandemic.
“Additional donor support, beyond that which was already committed before the outbreak of the pandemic, is needed to close the remaining balance of payments gap and ease the fiscal situation.” Said Mr Furusawa.