Catastrophe Containment and Relief Trust---Second Tranche of Debt Service Relief in the Context of the Covid-19 Pandemic

This paper proposes that the Executive Board approve the disbursement of a second 6-month tranche of CCRT debt service relief to 28 of the 29 members.

Abstract

This paper proposes that the Executive Board approve the disbursement of a second 6-month tranche of CCRT debt service relief to 28 of the 29 members.

Recent Developments: COVID-19 Pandemic and CCRT Debt Service Relief

1. The COVID-19 pandemic continues to exact a human and economic toll on IMF members eligible for assistance from the Catastrophe Containment and Relief Trust (CCRT). 3

  • Human toll: 29 CCRT-eligible members with debt to the Fund continue to experience a high rate of new cases (cumulatively lodged over 254 thousand cases), and associated deaths have risen over 5,209 (see Figure 1).

  • Economic toll: According to the latest WEO projections, projected growth in CCRT-eligible countries in 2020 has been adjusted downwards from +4.7 percent to -1.4 percent since January. 4

Figure 1.
Figure 1.

Human Toll of COVID-19 in CCRT Countries, September 10, 2020

(cumulative cases, 5 days moving average; t=0 is March 11, 2020)

Citation: Policy Papers 2020, 045; 10.5089/9781513558691.007.A001

Source: Johns Hopkins University, COVID-19 Statistics.

2. On March 26, 2020, the Executive Board approved changes to the CCRT to enable the Fund to provide grant assistance for relief on debt service for its poorest and most vulnerable members in the context of the COVID-19 pandemic. 5 The Executive Board determined that, effective April 14, 2020, the COVID-19 pandemic constitutes a Qualifying Public Health Disaster (QPHD) under the Catastrophe Containment (CC) Window of the CCRT, pursuant to the new QPHD test, 6 and subsequently approved the qualification for up to 2 years of debt service relief for all 29 CCRT-eligible countries with eligible debt to the Fund, subject to the availability of CCRT resources.

3. The Executive Board has approved the first tranche of grant-based debt service relief for all CCRT-eligible countries with eligible debt service falling due during the period April 14-October 13, 2020. The CCRT covered all debt service to the Fund of 28 eligible low-income countries falling due during April 14 – October 13, 2020, totaling about SDR 183 million (Table 1). This debt relief was supported by generous and timely grant contributions by IMF members (Table 2).

Table 1.

Eligible Countries and Eligible Debt Service Relief for the CCRT 2nd Tranche, as of end-September 2020 (In SDRs)

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Eligible debt service includes estimates for the GRA charges for Ethiopia and Comoros. For the 2nd tranche, principal repayment obligations for Ethiopia and Comoros amount to SDR 4,011,000 and SDR 778,750, respectively.

October 14, 2020 to April 13, 2021 is the maximum period that could be covered under the second tranche of the CCRT in light of available resources.

Subject to sufficient resources being secured.

Table 2.

New Contributions to the CCRT

(As of September 14, 2020)

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Disbursed as part of the 2015–17 fundraising campaign.

Subject to domestic approval.

4. CCRT-eligible members have also benefited from other IMF financial support. Since the start of the pandemic, the IMF has provided SDR 2.8 billion in concessional lending to 25 CCRT-eligible countries: 23 CCRT-eligible countries have received financial support through the Rapid Credit Facility (RCF), an emergency financing instrument, while three countries (Benin, Sao Tome and Principe, and Togo) received augmented support under existing lending arrangements. 7 Macroeconomic and governance policy commitments made by countries in these contexts support the objectives of providing debt relief via the CCRT.

CCRT-Eligible Countries: Policy Response and Staff Assessment

5. The economic impact of the pandemic on CCRT-eligible countries is set to continue. Real GDP growth in CCRT-eligible members is now expected to decline by 1.4 percent in 2020, with recovery in 2021 expected to be weak due to substantial uncertainty regarding the duration and depth of the crisis. Current projections for general government revenues (excluding grants) in 2020, have fallen, on average, by some 2.7 percentage points of GDP relative to pre-pandemic projections due to weaker economic activity and other COVID effects. 8 While CCRT-eligible countries have re-prioritized expenditures and reduced interest costs, fiscal deficits are expected, on average, to be some 2.3 percent of GDP higher than in pre-pandemic projections. On the external side, projected gross financing needs (for the two thirds of countries for which GFNs worsen) and external debt in 2020 are estimated to increase by 3.5 and 3.7 percentage points of GDP, respectively. 9

6. CCRT-eligible members have moved to meet commitments made to the Fund to enhance governance and transparency arrangements to safeguard priority and COVID-19-related spending. The most commonly adopted measures included: (i) monthly or quarterly COVID-19 expenditure reporting; (ii) periodic and ex post audit of COVID-19 spending either by an external auditor or by the national audit entity and publication of results; (iii) publication of procurement information, including data on beneficial ownership, of all COVID-19-related contracts above a certain threshold; and, (iv) establishment of oversight committees and dedicated accounts to manage the earmarked funds. Several CCRT-eligible countries use high-level steering committees to monitor the COVID-19 spending and associated budgetary processes from allocation to audit. Many countries are receiving technical assistance to upgrade their emergency spending framework and strengthen their PFM systems.

7. CCRT-eligible members with eligible debt service for the second tranche continue to implement public health and macroeconomic policy measures in response to the pandemic that are broadly in line with commitments made to the Fund, supported by financial resources freed by the debt relief. 10 These members are implementing a broad set of polices to address COVID-19, including ratcheting up containment, social and priority spending, as well as support for households and businesses (see text table). On average, these countries have boosted projected 2020 (fiscal or calendar year) priority spending relative to pre-COVID projections by some 1.2 percentage points of GDP notwithstanding significant loss of budgetary revenues in many cases. 11 Outlays on health and social protection each increased, on average, by about 0.5 percentage points of GDP. Spending on education notched an increase on average, but only for half of the countries; in other countries, education spending came under pressure as fiscal space tightened. Other COVID-related spending is projected to reach 2.0 percent of GDP, led by support for households.

Text Table. COVID-19 Related Fiscal Measure by CCRT Countries 1/

(percent of GDP)

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DSSI data and desk data for non-DSSI CCRT contries.

Subcomponents do not add up to total: some items may be missing for some countries.

8. Staff assesses that CCRT-eligible countries are generally pursuing sensible macroeconomic policies in response to the economic fallout from the global pandemic. Staff also assesses that the resources freed by the initial tranche of Fund debt service relief under the CCRT are being used to help provide emergency health, social and economic support to mitigate the impact of the pandemic on life and livelihood of the populations. 12

Funding Status of the CCRT and Proposal for Second Tranche of Debt Relief

9. The Fund has received grant pledges of just over one third of the SDR 1 billion fundraising target. So far, thirteen members have pledged about SDR 360 million in grants, of which SDR 235 million had been disbursed as of September 14, 2020 (see Table 2).

  • Early grant contributions were critical in unlocking the first tranche of CCRT relief. On March 11, the United Kingdom announced a commitment to provide a total of £150 million (SDR 136.3 million), half of which was disbursed on April 8, and the second installment of £75 million (SDR 68.3 million) is expected in the near term. Japan provided US$100 million (SDR 73.4 million) in grant support that was immediately available for the first tranche of CCRT relief. The People’s Republic of China disbursed SDR 5.6 million in grant support.

  • The ongoing fundraising efforts have generated additional generous contributions in recent months. Mexico contributed SDR 2.9 million as part of its original pledge in the context of the 2015 CCRT fund-raising round. Germany pledged EUR 80 million (SDR 66.2 million), half of which was disbursed on June 30, 2020, with a possible second disbursement of equal amount in early 2021 contingent on need. Luxembourg contributed EUR 2 million (SDR 1.7 million). The Netherlands pledged EUR 25 million (SDR 20.9 million), of which SDR 12.5 million was disbursed on July 24, 2020. More recently, Switzerland contributed CHF 25 million (SDR 19.5 million), Sweden contributed SEK 30 million (SDR 2.4 million), Norway disbursed NOK 180 million (SDR 14.5 million), and Bulgaria disbursed SDR 1.9 million.

10. Staff assesses the available resources and pledges to be sufficient to finance a second six-month tranche of debt service relief. With total grant pledges (SDR 360 million) already disbursed or about to be disbursed 13 covering both the first and second six-month debt relief period (amounting to SDR 183 million and SDR 168 million respectively), staff considers that overall resources are adequate for the second CCRT tranche, while maintaining a small resource cushion for other potential CCRT-qualifying shocks. 14 Hence, staff recommends the approval of the second tranche of grant assistance for debt service relief for 28 qualifying member countries in the period covering the six months from October 14, 2020 through April 13, 2021.

11. Based on grant pledges to date, resources are not sufficient to extend CCRT relief beyond the proposed second sixth-month period. Future tranches will be considered by the Executive Board, up to a maximum of two years from the date of the original determination (April 14, 2020), taking into account the availability of CCRT resources and the likely need of other potentially qualifying members. Significant additional grant pledges will be required to move close to the original funding target of SDR 1 billion and unlock a possible third tranche.

Annex I. Islamic Republic of Afghanistan: Update for CCRT Debt Relief

Recent Economic Developments. COVID-19 has inflicted a heavy economic and social toll on Afghanistan. The pandemic and containment measures, including on-off border closures and the lockdown of major cities, led to a collapse in economic activity in the second quarter. With the easing of containment measures in late May, economic activity is regaining its footing, and, assuming that the resurgence of infections is avoided, it could return close to the pre-pandemic level in the fourth quarter. For the year as a whole, staff expects the output to contract by 5 percent this year, as opposed to 3½ percent growth projected prior to the pandemic. 1 The resulting losses of jobs and income are pushing thousands of Afghan families into poverty and threaten to reverse social gains of the past decade. Inflation spiked in the first half of 2020 due to border closures and panic buying but is expected to moderate to an annual 5 percent by end-year thanks to the re-opening of borders in early June and a good harvest. Tax revenue fell by 18 percent through end-June compared to the same period of 2019 due to the economic downturn and the extension of the first quarter tax filing and payment deadlines. Revenue losses and spending for health and social protection and to support the economy are worsening the fiscal deficit which is expected to widen to 2.8 percent of GDP (compared to a deficit of 0.8 percent of GDP projected pre-COVID). The disruption of exports and projected fall in remittances, as thousands of Afghan migrants returned from neighboring countries, are opening a balance of payments deficit estimated at about US$570 million (3 percent of GDP) in 2020, below April projections due to a larger decline in imports.

Public health and macroeconomic policy response. Given the limited effectiveness of monetary policy, fiscal measures were mobilized to mitigate the social and economic impact of the pandemic. Through June, the authorities had allocated about 1.3 percent of GDP spending for COVID-related needs. In total, COVID-related expenditure in 2020 is expected to amount to 2.9 percent of GDP, including for (i) health package, including building hospitals (0.4 percent of GDP); (ii) social package, including the now concluded bread distribution program and the social distribution program financed by the World Bank (1.6 percent of GDP) approved on August 4; and (iii) package to support agriculture (0.4 percent of GDP) under implementation. The authorities’ response to the pandemic has been boosted by substantial support from donors who are providing new and reallocating existing grants expected to amount to 3.2 percent of GDP in 2020.

Islamic Republic of Afghanistan: COVID-Related Fiscal Measures

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The downward revision since the approval of the disbursement under the Rapid Credit Facility (RCF) in April reflects deeper-than-expected impact of the pandemic and lockdown measures.

Governance safeguards. The authorities agree on the importance of ensuring good governance in executing pandemic-related spending. They are commencing the preparation of quarterly reports on pandemic-related spending. Further, and in line with the authorities’ commitments at the time of the RCF disbursement, the Supreme Audit Council will undertake audits of selected COVID-19 spending in FY2020 and publish its reports, by a revised deadline of June 2021. As part of their reforms to strengthen transparency in procurement, the authorities are planning to amend procurement procedures to publish beneficial ownership information of all entities contracting with the government on the online portal of the National Procurement Agency which regularly publishes procurement contracts.

IMF support. In April, the Executive Board approved a disbursement in the amount of SDR 161.9 million (about US$220 million; 50 percent of quota) under the RCF. On August 12, 2020, IMF staff reached a staff-level agreement with the Afghanistan authorities on an economic reform program to be supported by a three-and-half year, SDR 259 million (about US$364 million; 80 percent of quota) Extended Credit Facility arrangement. Executive Board consideration of this request is expected by late October.

Upcoming CCRT-eligible debt service. Afghanistan has debt service of SDR 2.4 million falling due during the six-month interval from October 14, 2020 to April 13, 2021, the maximum period covered by the second tranche of debt service relief under the CCRT.

Staff assessment. The authorities’ priorities have been rightly focused on mitigating the social and economic fallout of the pandemic and preparing the ground for a durable recovery. They are appropriately allowing a fiscal loosening this year and have sought donor grants to help accommodate a revenue shortfall and fund critical health and social mitigation spending while putting in place governance safeguards to strengthen its accountability and transparency. They are also curtailing lower priority spending and introducing nontax measures to contain the deficit deterioration. Resources freed by Fund debt service relief under the CCRT and other support from the Fund are helping create room for emergency health, social, and support to the economy to mitigate the impact of the pandemic on the health and livelihood of the population.

Table 1.

Islamic Republic of Afghanistan: Selected Economic Indicators, 2017–25

(Quota: SDR 323.8 million)

(Population: approx. 32.2 million; 2019)

(Per capita GDP: approx. US$586; 2019)

(Poverty rate: 54.5 percent; 2016–2017)

(Main exports: dried and fresh fruits and vegetables, medical seeds, 2019)

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Source: Afghan authorities, United Nations Office on Drugs and Crime, WITS database, and IMF staff estimates and projections.

Pre-Covid refers to end-January 2020 projection.

Excluding the narcotics economy.

Comprising mainly current spending.

Defined as domestic revenues minus operating expenditures.

Public sector only. Incorporates committed but not yet delivered debt relief. Debt relief recorded fully at time of commitment.

Public debt includes promissory note issued by MoF to settle DAB’s Kabul Bank exposure.

In months of next year’s import of goods and services.

Current account does not include COVID emergency financing grants (they are included in fiscal accounts).

Annex II. Benin: Update for CCRT Debt Relief

Recent Economic Developments and outlook. The COVID-19 pandemic continues to have a severe impact on the Beninese economy. Its negative ramifications are affecting the country at a time when it is already coping with a prolonged closure of the border with Nigeria—its main trading partner. 1 Global spillovers (lower remittances, trade, transport, and FDI) are expected to significantly impact both domestic and external demand, resulting in lower economic growth. As a result, 2020 and 2021 real GDP growth is estimated at 2 and 5 percent, respectively, down from pre-COVID-19 forecasts of nearly 7 percent. The rebound in growth is expected to be driven by robust primary and secondary sectors growth (cotton, crops, construction) in 2020 and a pick-up in tertiary sector activities (trade, transport) in 2021. On the fiscal front, the COVID-19 shock will lead to a revenue shortfall, higher expenditure from health-related needs and mitigation measures to support economic activity. Preliminary estimates point to an overall fiscal deficit of at least 3.7 percent of GDP in 2020— compared to 1.8 percent of GDP pre-COVID-19. Staff has revised down real GDP growth and increased the projected fiscal deficit and overall balance of payment deficit in 2020 relative to the 1st CCRT staff appraisal (April 2020) due to worsening external economic conditions in 2020 and prolonged trade disruptions with Nigeria.

Public health and macroeconomic policies. As of September 9th, the total confirmed COVID-19 cases reached 2194, including 1793 recoveries, 40 fatalities, and 401 active cases. 2 The authorities are taking significant measures to contain the economic impact of the pandemic, including a health response plan, social assistance to vulnerable households, a stimulus package (announced on June 10, 2020) 3, and a new subsidy fund to support credit access for small and medium companies. Their health response plans remains unchanged since April 8th, 2020 when Benin received the 1st tranche of the CCRT on April 15, 2020 for an amount of SDR 7.4 million (CFAF 6 billion), about 2 percent of the COVID-19 total response.

Benin: Response to COVID-19 in 20201

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Source: Beninese Authorities and IMF staff estimates

As of July 29, 2020

Governance safeguards. The authorities are planning to perform a post-crisis audit of the COVID-19 response plan, including the use and effectiveness of the committed funds. This audit will be published by the Accounting Chamber in 2021 in its annual activity report and made available on its website. In addition, the Government will publish, in 2021, the procurement documents and contracts related to the major projects implemented under the response plan, indicating the amounts granted and the names of the beneficiaries. In addition, the Law enacted on April 20, 2020 establishing the High-Commission for the prevention of corruption in Benin will help promote domestic accountability and transparency.

IMF support status. Benin’s three-year arrangement under the Extended Credit Facility (ECF) concluded on July 31, 2020. The completion of the sixth and final review under the arrangement enabled the disbursement of SDR 91.931 million (about US$ 125 million), of which SDR 73.013 million (US$ 103.3 million) were due to an augmentation of access of 61.4 percent of Benin’s quota to address the urgent financing needs associated with the pandemic. Benin has not received nor requested emergency support under the Rapid Credit Facility (RCF) as of September 9th, 2020. However, the authorities have expressed interest in a successor UCT-quality program. The discussions will continue later this year to identify the most appropriate form of engagement with the Fund.

Upcoming CCRT-eligible debt service. Benin has debt service of SDR 6.4 million falling due during the 6-month interval from October 14, 2020 to April 13, 2021, the maximum period covered by the 2nd tranche of debt service relief under the CCRT.

Staff assessment. Staff assess that Benin is pursuing appropriate macroeconomic policies to address the global pandemic. Staff also assess that the resources freed by the initial tranche of Fund debt service relief under the CCRT, as well as the augmentation of access under the ECF-supported arrangement, are being used to help provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on the lives and livelihoods of the population.

Table 1.

Benin: Selected Economic and Financial Indicators, 2018–25

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Sources: Beninese authorities; and IMF staff estimates and projections.

Includes re-exports and imports for re-export, except for EBS/19/398 for which re-export activities are recorded in current transfers.

In 2024 and 2025, the decline in the overall balance of payments reflects the first repayment of the 2019 eurobond.

The GDP rebasing published in 2019 revised down the public debt ratio by about 15 percentage points (see Annex I of IMF Country Report No. 19/398).

Annex III. Burkina Faso: Update for CCRT Debt Relief

Recent economic developments. The authorities’ containment measures helped slow the spread of COVID19 in Burkina Faso but exacted a toll on the economy. Preliminary data show a broad-based contraction in the first half of the year, with substantial output loss in hotels, restaurants, and commerce. Consequently, real GDP is expected to contract by 2.0 percent in 2020 (from a projected pre-pandemic growth of 6 percent). Growth in 2021 (3.9 percent) is also projected lower than the pre-pandemic level (6 percent). The 2020 fiscal deficit is projected to widen to 6.0 percent of GDP, 3.0 percentage points higher than in the pre-COVID19 budget. The growth and fiscal outlook are also worse than projected at the time of the approval of the CCRT 1 in April. External financing needs are also expected to worsen by 2.2 percentage points of GDP compared to pre-COVID levels, essentially due lower private financial inflows.

The authorities’ health and macroeconomic response has been facilitated by their own policy adjustments and substantial external resources, including debt relief under the CCRT. The measures and financial support were reflected in the revised 2020 budget approved in July, which made room for COVID19-related priority expenditures (0.8 percent of GDP) and other COVID19- related spending (2.6 percent of GDP) by keeping the wage bill unchanged and cancelling non-priority spending (1.8 percent of GDP). The latter consists mostly of important but non-urgent investments (1.2 percent of GDP). The resulting higher fiscal deficit will be financed to a large extent by higher external support. In addition to the Fund’s disbursements (RCF and planned 4th and 5th ECF reviews) and debt relief under the CCRT, other sources of external financing include the World Bank, the African Development Bank, the European Union, and France. Burkina Faso is also expected to receive CFAF 13.9 billion (0.2 percent of GDP) debt service suspension in 2020 from creditors participating in the G-20 debt service suspension initiative (DSSI).

Burkina Faso: COVID Related Fiscal Measures

(Percent of GDP) 1/

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Sources: Burkina Faso authorities and IMF staff estimates.

The definitions of priority and COVID-19 spending and the numbers in this table overlap but are not directly comparable with the attached SEI table.

Governance safeguards. An oversight mechanism, with the participation of civil society, is in place to ensure transparency and accountability over COVID19-related spending. Periodic audited reports on this spending are to be published, with the first covering spending through end-June 2020 due to be published by end-October 2020. The World Bank is also helping the authorities adopt a new emergency spending and governance framework for dealing with future crisis.

IMF support status. Burkina Faso’s three-year ECF arrangement was approved in March 2018 for SDR 108.36 million (90 percent of quota). Because of the COVID19 pandemic and the uncertainty surrounding its duration and macroeconomic effects, the 4th ECF and 5th reviews will be combined, and their completion is expected in the fourth quarter of 2020. A Rapid Credit Facility (RCF) disbursement of SDR 84.28 million (70 percent of quota) was approved in April 2020. Burkina Faso has also benefited from the Board decision of April 13, 2020 to provide debt service relief under the Catastrophe Containment window of the CCRT (SDR 8.7 million, or US$ 11.9 million).

Upcoming CCRT-eligible debt service. Burkina Faso has debt service of SDR 10.3 million falling due during the 6-month interval from October 14, 2020 to April 13, 2021, the maximum period covered by the 2nd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Burkina Faso is pursuing appropriate macroeconomic policies to address the effects of COVID19. Based on information available to date, staff also assesses that the resources freed by the initial tranche of CCRT debt service relief, and other support from the Fund, are being used to help provide emergency health, social, and economic support to the economy to mitigate the impact of the pandemic on the lives and livelihoods of the population.

Burkina Faso: Selected Economic Indicators

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Sources: Burkinabè authorities; and IMF staff estimates and projections.

Percent of beginning-of-period broad money.

Annex IV. Burundi: Update for CCRT Debt Relief

Recent economic developments. While the number of officially reported COVID-19 infections and deaths remains low, the pandemic is having a severe adverse economic impact on Burundi. Economic growth projections have been revised down by 5.3 percentage points to -3.2 percent in 2020. The pandemic has created large external financing needs from lower exports, elevated imports in part related to pandemic-related fiscal spending, and reduced remittances inflows. The current account deficit including grants is expected to grow to 20.7 percent of GDP, putting pressure on already low reserves. The pandemic has also created large fiscal financing needs: tax revenue is expected to drop to 17.0 percent of GDP (from 17.4 percent of the higher pre-pandemic GDP projection), spending is projected to rise by 3.4 percent of GDP, and as a result the fiscal deficit including grants is expected to rise to 9.5 percent of GDP. Several adverse pandemic effects are expected to persist in 2021.

Public health and macroeconomic policy response. Shortly after the outbreak of the pandemic, the authorities quarantined travelers from affected countries and closed the borders except for merchandise trade, humanitarian, and medical travel and transport. Since July, they have stepped up COVID testing, building on a renewed close collaboration with the WHO. The authorities have also developed a pandemic response plan that focuses on strengthening the health care system, the social safety net, and parts of the road network to facilitate access to sick people, at a cost of US$150 million (4.7 percent of GDP). Further, the authorities intend to provide targeted support to hard-hit sectors, at a cost of US$12 million (0.4 percent of GDP). In addition to external support, these measures are to be financed in part by cutting back on public investment. So far, the only COVID-related financial support comes from a US$5 million grant from the World Bank and IMF CCRT grants. A lack of external support has constrained the implementation of the authorities’ COVID response plans.

Governance safeguards. The authorities committed in the context of the original CCRT request to making the best possible use of the funds provided in the context of COVID-19. The Court of Auditors, in consultation with the development partners concerned, will undertake and publish an ex post audit of expenses related to COVID-19 on the government’s website within 9 months after the end of the fiscal year. With the first tranche of CCRT grants having been provided only in late July 2020, it is too early to assess implementation.

IMF support status. The Executive Board approved on July 20, 2020, a grant under the IMF’s Catastrophe Containment and Relief Trust (CCRT) to cover Burundi’s debt service falling due to the IMF from July 21, 2020 to October 13, 2020, the equivalent of SDR 5.48 million. In April 2020 the authorities requested emergency assistance through the Rapid Credit Facility. Burundi currently has no Fund-supported program.

Upcoming CCRT-eligible debt service. Burundi has debt service of SDR 4.82 million falling due to the Fund during the 6-month interval from October 14, 2020 to April 13, 2021, the maximum period covered by the 2nd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Burundi is pursuing broadly appropriate macroeconomic policies to address the impact of the pandemic. The authorities have appropriately committed to use the resources freed by Fund debt service relief under the CCRT to help provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on life and livelihood of the population.

Table 1.

Burundi: Selected Economic Indicators, 2018–25

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Sources: Burundi authorities; and IMF staff estimates and projections.

Includes the grant for the debt service falling due in the 18 months from October 14, 2020, which is subject to the availability of resources under the CCRT.

Annex V. Central African Republic: Update for CCRT Debt Relief

Recent Economic Developments. The number of new confirmed COVID-19 cases has recently declined, reflecting in part the discontinuation of widespread testing, and containment measures are progressively being relaxed. The pandemic has had a severe impact on economic activity, trade, and, government revenue. Activity in trade, transportation, tourism and hospitality was significantly affected by low external demand and containment measures (travel bans and closure of non-essential stores). As a result, growth projections for 2020 and 2021 have been revised down to -1 and 3 percent, respectively (from 4½ and 5 percent pre-pandemic). For 2020, a sharp decline in exports (from lower external demand and commodity prices), along with lower financial flows, have contributed to a significant increase in external financing needs to 9.3 percent of GDP from 5.0 percent projected pre-pandemic. The impact of containment measures on economic activity, imports, and tax administration (less controls) is projected to result in a domestic revenue shortfall of close to 2 percent of GDP. This, along with a lower nominal GDP and Covid-related spending, would bring the domestic primary fiscal deficit-to-GDP ratio to around 6 percent, compared with the less than 3 percent projected pre-pandemic.

Public health and macroeconomic policy response. The government ‘s COVID-19 health response plan was prepared in collaboration with the WHO and aims at containing the pandemic and strengthening the country’s capacity to cope with its impact. As envisaged under the RCF approved in April, the supplementary budget law adopted in early July 2020 channels the additional external budget support provided by the Fund and other donors to contribute to the financing of this response plan and of other measures to alleviate the economic impact of the pandemic. Overall, it provides for about 1.2 percent of GDP in Covid-related spending, including 0.9 percent for prevention and containment and 0.2 percent of GDP in transfers to vulnerable household and enterprises. Consequently, priority expenditures are projected at 2.9 percent of GDP in 2020, compared to 2.2 percent of GDP before the pandemic.

COVID Related Fiscal Measures

(in percent of GDP)

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/1 The increase in “priority expenditures” is entirely COVID-related.

Governance safeguards. A committee, composed of representatives of the government and the donor community, was established in July 2020 to monitor Covid-related expenditures and the emergency financial assistance provided by donors, including from the CCRT and DSSI. It had its inaugural meeting on August 14 and will meet monthly to monitor the expenditures executed by the government and by donors and will make recommendations to improve their efficiency and transparency. In addition, the Procurement Directorate will publish all related tenders, the criteria for selection, as well as the selected enterprises, while an ex-post audit will be conducted and published.

IMF support status. On December 20, 2019, the Executive Board approved a three-year SDR 83.55 million (75 percent of quota) arrangement under the Extended Credit Facility (ECF). It also approved an SDR 27.85 million (25 percent of quota) disbursement under the RCF on April 20, 2020. A virtual mission to discuss the first and second reviews under the ECF is tentatively scheduled for late September-early October 2020. The first tranche of the CCRT debt relief, covering April 14– October 13, 2020 amounts to SDR 2.956 million.

Upcoming CCRT-eligible debt service. C.A.R has debt service of SDR 2.9 million falling due during the 6-month interval from October 14, 2020 to April 13, 2021, the maximum period covered by the 2nd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that C.A.R is pursuing appropriate macroeconomic policies to address the global pandemic. Referencing the public health and governance paragraphs above, staff also assesses that the resources freed by the initial tranche of Fund debt service relief under the CCRT, and other support from the Fund, are being used to help provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on life and livelihood of the population.

Table 1.

Central African Republic: Selected Economic and Financial Indicators, 2018–2025

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Sources: C.A.R. authorities and IMF staff estimates and projections.

Corresponds to IMF staff projections from the ECF request in December 2019.

Expenditure is on a cash basis.

Excludes grants, interest payments, and externally-financed capital expenditures.

Comprises government debt to BEAC (including on-lending of IMF resources), commercial banks, and government arrears.