Catastrophe Containment and Relief Trust—Third Tranche Of Debt Service Relief In The Context Of The COVID-19 Pandemic
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Publication Date:
05 Apr 2021
eISBN:
9781513576589
Language:
English
Keywords:
CCRT debt service relief; CCRT-eligible country; debt service relief; governance safeguards commitment; tranche of debt service relief; Debt service; Debt relief; COVID-19; Global; CCRT country; CCRT debt relief; status of the CCRT
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FOR IMMEDIATE RELEASE

Abstract

FOR IMMEDIATE RELEASE

FOR IMMEDIATE RELEASE

Washington, DC– April 5, 2021: The Executive Board of the International Monetary Fund (IMF) approved on April 1, 2021 a third tranche of grants for debt service relief for 28 member countries under the Catastrophe Containment and Relief Trust (CCRT). This approval follows two prior tranches approved on April 13, 2020 and October 2, 2020, respectively (see Press Releases 20/165 and 20/304). It enables the disbursement of grants from the CCRT for payment of all eligible debt service falling due to the IMF from its poorest and most vulnerable members from April 14, 2021 to October 15, 2021, estimated at SDR 168 (US$238) million. This tranche of grants for debt service relief will continue to help free up scarce financial resources for vital emergency health, social, and economic support to mitigate the impact of the COVID-19 pandemic. Subject to the availability of sufficient resources in the CCRT, debt service relief could be provided for the remaining period through from October 16, 2021 to April 13, 2022 amounting to a total of about SDR 680 (US$964) million.

In March 2020, Managing Director Kristalina Georgieva launched an urgent fundraising effort to raise SDR 1 billion (US$1.4 billion) in grants for the CCRT. This would enable the CCRT to provide financial assistance for relief on debt service for up to a maximum of two years, while leaving the CCRT adequately funded for future needs. Thus far, donors have pledged contributions totaling about SDR 545 million (US$774 million), including from the European Union, the UK, Japan, Germany, France, the Netherlands, Switzerland, Norway, Singapore, China, Mexico, Philippines, Sweden, Bulgaria, Luxembourg, and Malta.

Executive Board Assessment1

Executive Directors welcomed the opportunity to consider the approval of grants under the Catastrophe Containment and Relief Trust (CCRT) to support the third tranche of debt service relief for the Fund’s poorest and most vulnerable members. They noted that the COVID-19 pandemic continues to exact a severe human and economic toll on these countries and that the resources freed up by the first and second tranches of CCRT debt service relief had helped mitigate the impact of the pandemic.

Directors agreed that the available resources and pledges are sufficient to finance the third tranche of debt service relief for the period from April 14 to October 15, 2021. Accordingly, they approved grant assistance under the CCRT for relief for 28 eligible members that have debt service falling due during this period.

Directors concurred that countries that received the CCRT grants for debt relief are generally pursuing appropriate macroeconomic policies in response to the economic fallout from the global pandemic. They welcomed that a number of member countries were transitioning to Upper Credit Tranche-quality arrangements which would provide a stronger policy framework for the recovery period. Directors also observed that most countries would benefit from a resumption of Fund surveillance and updated debt sustainability assessments.

Directors noted the progress made in implementing governance safeguards commitments regarding COVID-19 related spending in CCRT-eligible countries. However, they regretted implementation delays in some countries, particularly in disclosing beneficial ownership information on entities awarded government contracts. Directors thus underscored the importance of continued follow-through on the commitments on governance and transparency, supported if necessary, by technical assistance.

Directors welcomed the generous contributions that enabled debt relief through the third tranche, and many Directors noted the recent large contribution by the European Union. Directors stressed, however, that additional resources will be needed to provide the CCRT grants f or debt relief beyond the proposed third tranche. Directors also stressed that efforts to secure additional resources to reach the funding target of SDR 1 billion should continue to ensure that adequate grant resources are in place for other CCRT-qualifying shocks in the future.

1

At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.

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

Recent economic developments. Activity rebounded in the second half of 2020 after containment measures were progressively removed over the summer. Mobility is back nearly to pre-crisis levels, and a few containment restrictions remaining in place are generally ignored by the public. The turnaround notwithstanding, the pandemic has imposed a heavy social, fiscal, and growth toll—it forced thousands into poverty,1 set back efforts towards self-reliance, and caused a permanent output loss. The economy is estimated to have contracted by 5 percent in 2020 compared to pre-COVID growth projection of 3.5 percent. After peaking at 8.7 percent in April, annual inflation fell to 5 percent in December, reflecting a decline in food prices thanks to the resumption of trade and a good fall harvest. Budget revenue fell by 16 percent in 2020 compared to 2019, and spending rose to mitigate the health and economic impact of COVID-19, leading to a widening of the fiscal deficit to 2.5 percent of GDP. The current account deficit before grants is estimated at 26 percent of GDP in 2020, slightly lower than in 2019, as the drop in exports was offset by lower imports. The pace of the recovery seems to have moderated in late 2020 amid the second wave of COVID-19 infections in November and December although the infections trend reversed in January. Growth is projected to rebound to 4 percent in 2021 supported by a recovery in services and industry, sectors that suffered most from COVID-19. Risks to the outlook are to the downside and stem from security and the outcome of peace negotiations as well as a possibility of poor spring harvest due to a dry winter, shortfalls in aid, and political tensions.

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. Priority expenditure, consisting of health, education, and social outlays, rose to 7.4 percent of GDP in 2020 compared to 5.1 percent of GDP projected pre-COVID. The increase was for the most part driven by COVID-related outlays, namely (i) pandemic response health programs to prevent and contain the spread of the virus (0.9 percent of GDP); and (ii) the government’s bread distribution program and the REACH social distribution program financed by the World Bank (1 percent of GDP). In addition, the government directed 0.4 percent of GDP of spending to support employment, agriculture, and food supply. In total, COVID-related expenditure in 2020 amounted to 2.2 percent of GDP, somewhat less than 2.9 percent of GDP envisioned at the time of the ECF approval last November. The authorities’ response to the pandemic has been boosted by substantial support from donors, who in response to COVID-19 mobilized new and redirected existing grants, including for general budget support, in the amount of 2.7 percent of GDP. In 2021, the authorities plan to spend 0.9 percent of GDP on COVID-related expenditure, with two thirds accounted for by the remainder of the REACH program.

Afghanistan: COVID-Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Included in health outlays under the priority expenditures.

Consisting of the bread distribution and REACH programs. Included in social outlays under the priority expenditures.

Governance safeguards. The authorities published the first quarterly report on pandemic-related spending last October. Further, and in line with the authorities’ commitment under the Extended Credit Facility (ECF) arrangement, the Supreme Audit Council will soon undertake audits of selected COVID-19 spending and publish its reports by June 2021.2 Finally, as part of their reforms to strengthen transparency in procurement and a prior action under the ECF arrangement, the authorities amended procurement procedures to require publication of beneficial ownership information of all entities contracting with the government within 30 days of contract signing. This will be made available through the online portal of the National Procurement Agency, which regularly publishes procurement contracts.3

IMF support. The Executive Board approved a disbursement in the amount of SDR 161.9 million (about US$220 million; 50 percent of quota) under the Rapid Credit Facility in April 2020. On November 6, 2020, the Executive Board approved a 42-month SDR 259 million (80 percent of quota; about US$370 million) arrangement under the ECF. The mission to conduct the first review under the arrangement is scheduled for March.

Upcoming debt service. Afghanistan has debt service of SDR 2.4 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the third tranche of debt service relief under the CCRT.

Staff assessment. The authorities’ priorities have rightly focused on mitigating the social and economic fallout of the pandemic and preparing the ground for a durable recovery. They appropriately allowed a fiscal loosening in 2020 and sought donor grants to help accommodate the revenue shortfall and fund critical health and social mitigation spending while curtailing lower priority outlays and putting in place governance safeguards to strengthen its accountability and transparency. Resources freed by Fund debt service relief under the CCRT and other support from the Fund have helped create room for priority health and social spending. While most of fiscal pandemic-support measures have been unwound, the authorities remain focused in 2021 on providing, with assistance from donors, targeted support to sustain the recovery, limit scarring, and mitigate the pandemic’s impact on the health and livelihood of the vulnerable population.

Table 1.

Afghanistan: Selected Economic Indicators, 2018–21

(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, 2020)

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Sources: Afghan authorities, United Nations Office on Drugs and Crime, UNDP, 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.

Annex II. Benin: Update for CCRT Debt Relief

Recent Economic Developments.1 Total confirmed COVID-19 cases reached 5,039, including 62 fatalities as of February 16, 2020. The pandemic continues to have a severe economic impact on the Beninese economy, but some signs of recovery, although fragile, appeared in the second semester of 2020. However, early socioeconomic indicators show that previously improving socioeconomic trends, including inclusiveness, have been curbed. The poverty rate is projected to increase from 38.5 percent in 2019 to above 45 percent in 2020. Real GDP growth is estimated at around 2 percent in 2020 and is projected to increase to about 5 percent for 2021. Agriculture, commerce and trade, transport, and the hospitality industry were among the most affected sectors in 2020 due to containment and mitigation measures, global spillovers (lower remittances, trade, transport, and FDI), and the prolonged border closure with Nigeria—Benin’s main trading partner.2 Growth estimates and outlook remain unchanged compared to the previous the CCRT Board paper (October 2020). The overall fiscal deficit is estimated at 4.9 percent of GDP in 2020 and is projected to ease slightly to 4.5 percent of GDP in 2021. The COVID-19 shock, coupled with the border closure with Nigeria, led to a revenue shortfall and higher expenditure from health-related needs and mitigation measures to support economic activity. Public debt is estimated to increase to 45.4 percent of GDP at end-2020. The current account deficit is projected to remain wider than pre-COVID-19. The recent EUR 1 billion Eurobond issuance in January 2021 helped increase buffers.

Public health and macroeconomic policies. The authorities adopted a set of measures in 2020 amounting to up to 3.7 percent of GDP and extending over multiple years (2020–22). It includes a health preparedness and response plan and a socio-economic response plan to support formal sector companies and vulnerable households—for the latter, through cash transfers, electricity and water bills subsidies, and urgent social projects. In addition, a public guarantee plan and credit lines and refinancing measures were established to foster access to finance for micro, small, and medium enterprises. Benin benefited from the 1st and 2nd tranche of the CCRT covering the period between April 14, 2020 and April 13, 2021 for an amount of SDR 13.8 million (CFAF 6 billion), about 4.2 percent of the COVID-19 total response.

Benin: COVID-19 Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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

IMF Country Staff Report No 19/398 (5th review, December 2019).

2021 Budget Law (No. 2020–33, December 2020).

Governance safeguards. In their latest Letter of Intent3, the authorities reiterated their commitments to ensure transparency and accountability in the management of COVID-19-related expenditures. The Accounting Chamber is expected to publish the result of its independent audit of the use and effectiveness of the funds committed by end-June 2021. Since December 2020, the authorities publish online, on a monthly basis, procurement documents and key information related to contracts above CFAF 10 million implemented under the COVID-19 response plan, also publishing the names of the beneficial owners of the awarded companies, as well as the validation of delivery. The new legal framework for the management of public investment was adopted on January 6, 2021.

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. The IMF Board approved the disbursement of emergency financing under the Rapid Credit Facility (RCF) and purchase under the Rapid Financing Instrument (RFI) in December 2020 equivalent to 100 percent of quota (SDR 123.8 million or US$ 176 million). The authorities have expressed their interested in a new Fund-supported program following the presidential elections in April 2021.

Upcoming debt service. Benin has debt service of SDR 5.3 million falling due during the interval from April 14, 2021 to October 15, 2021, the period covered by the third 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 tranches of Fund debt service relief under the CCRT, the augmentation of access under the ECF-supported arrangement, as well as the emergency financing under the RCF/RFI 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, 2018–26

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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 2021, the increase in the overall balance of payments reflects the issuance of the 2021 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. COVID-19 continues to have a severe socio-economic impact on Burkina Faso, thereby exacerbating the ongoing security and humanitarian crisis. The cumulative number of confirmed cases stood at 11,982 as of end-February 2021, and the second wave of COVID-19 cases that spiked in the beginning of December 2020 is slowing down. Monthly surveys, co-led by the World Bank, indicate that travel restrictions negatively affected farming activities as well as non-farming income. However, economic activity started to recover in the third quarter of 2020 as testing improved, lockdown measures and travel restrictions were relaxed, and gold production surged. Consequently, real GDP growth is now estimated at 0.8 percent in 2020 (compared to 2 percent contraction projected earlier and the 5.5 percent pre-COVID-19 projection), and the rebound is expected to continue in 2021 (around 4 percent compared to 5.7 percent pre-COVID-19 projection). On the fiscal front, the overall deficit is estimated to have widened to 5.1 percent of GDP in 2020, compared to a pre-COVID-19 projection of 3.5 percent of GDP, as revenues declined and spending increased to mitigate the economic and social impacts of the COVID-19 shock. The fiscal deficit is expected to remain higher (around 5.5 percent) in 2021, driven by the projected costs for COVID-19 vaccinations, recovery, and security. Debt indicators have deteriorated compared to pre-COVID-19 projections (Country Report No.19/393), reflecting both GDP decline and additional borrowing to finance the COVID-19 response. The current account deficit is estimated to have widened in 2020 relative to 2019, as external demand was subdued and imports rose, including for COVID-19-related internal demand. This contributed to substantial external financing needs in 2020–21, which are being filled by adjustment measures and support from the Fund, World Bank, and other development partners (see below).

Public health and macroeconomic policy response. The higher fiscal deficit is financed through policy adjustment and substantial external resources, including debt relief under the CCRT. Priority spending is estimated to have increased by 1.4 percent of GDP in 2020 and other COVID-19-related spending by 2.5 percent of GDP (relative to pre-COVID projections). These increases were partially accommodated by keeping the wage bill unchanged, cancelling non-priority spending on goods and services, and reducing current transfers. The authorities also postponed important but non-urgent investments to accommodate new COVID19-related health investments and security spending (Country Report No.2020/304). The COVID19-related investments include a partial guarantee fund for companies in hard-hit sectors such as transport, hospitality, and restaurants to help the financial sector inject fresh credit into the economy in 2020–2021. In addition to the Fund’s support (see below), the authorities received strong support from the World Bank and other donors. The 2021 budget projects an increase in priority spending by 1.2 percent of GDP, a continued support for businesses hard-hit by COVID-19 (0.3 percent of GDP), and enhanced public investment to kickstart the recovery process. Efforts to mobilize external support remain necessary, not only to offset revenue lost (about 0.2 percent of GDP), but also to meet the costs for vaccination, recovery, and security. Burkina Faso is expected to further benefit from debt service suspension from creditors participating in the DSSI in 2021.

Burkina Faso: COVID Related Fiscal Measures 1/

(Percent of GDP, unless otherwise indicated)

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Sources: Burkinabe authorities and Fund staff estimates.

Most recent projection before March 1, 2020.

Governance safeguards. All COVID-19-related support was channeled through the revised 2020 budget as well as the 2021 budget, and the authorities remain on course with fiscal measures to mitigate the socio-economic fallout of the pandemic. A high-level oversight mechanism, established at the onset of the pandemic, continues to operate, with the participation of civil society. The first internal audit report of COVID-19-related spending up to the end of June 2020 was completed in October 2020. The report highlights areas of strengths (including the establishment of specific units to manage COVID-19-related resources), but also improvements needed to enhance the effectiveness and regularity of spending. In this context, with technical assistance from the World Bank, the authorities have adopted a new emergency spending framework for dealing with future crises. The framework covers the overall institutional arrangements, financing of emergency mechanisms, appropriate budgetary, accounting, and financial management procedures, ex-post accountability mechanisms, and tools to ensure transparency. Public procurement contracts and beneficial owners of contract awardees will be published by end-June 2021 along with the audited report of COVID-19-related spending as of end-December 2020.

IMF support status. Burkina Faso received a disbursement of SDR 36.12 million (30 percent of quota) following the satisfactory completion in November 2020 of the 4th and 5th reviews of its three-year ECF-supported program. Together with the emergency assistance in April 2020 under the Rapid Credit Facility (RCF), the Fund’s disbursements stood at SDR120.4 million (100 percent of quota) for 2020, and total outstanding credit now stands at SDR 266.2 million (221.5 percent of quota). The authorities are preparing a new national development plan for 2021–2025, and they have expressed interest in pursuing their reform agenda through a new financial arrangement with the Fund.

Upcoming CCRT eligible debt service. Burkina Faso has debt service of SDR 9.65 million falling due during April 13, 2021 to October 15, 2021, the maximum period covered by the 3rd 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 the COVID-19 global pandemic. Based on information available to date, staff also assesses that the resources freed by the first and second tranches of Fund debt relief under the 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.

Table 1.

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. The number of new COVID cases is rising faster than during the first wave with an average of 170 new cases per week though fatalities remain limited.1 Nevertheless, the COVID-19 pandemic has impacted economic activities to a lesser degree than envisaged during the second tranche of debt relief under the IMF’s Catastrophe Containment and Relief Trust (CCRT), as Burundi imposed limited social distancing measures.

  • Staff estimates that real GDP contracted by about 1.3 percent in 2020. Lockdown measures in trading partners’ countries and the airport closure during part of 2020 disrupted supply chains and slowed down tertiary-sector activities (tourism-related activities and commerce), compensated somewhat by stable agricultural and industrial production. The pandemic seems to have impacted most households, especially through loss of income due to border closure, business bankruptcy, or furloughs. Assuming a partial recovery in services during H2 of 2021, growth in 2021 could reach about 2.8 percent.

  • The current account deficit widened in 2020 on account of lower exports, partly due to regulatory changes in the gold and coffee sectors to enforce the repatriation of exports proceeds. Foreign exchange reserves have remained critically low, at less than one month of imports.

  • The fiscal deficit reached 9.8 percent of GDP in 2019/20 relative to 7.8 percent of GDP at the time of the second tranche of CCRT in view of larger-than-projected current spending. Larger-than-budgeted COVID-related spending could push the fiscal deficit well above the budget target of 2.6 percent of GDP in 2020/21, although the authorities’ response remains constrained by the limited availability of financing.

  • The banking sector appears generally in good health. However, frequent loan restructurings, including in response to the pandemic, could mask potential vulnerabilities.

Public health and macroeconomic policy response. Health measures remain focused on preventative measures (frequent handwashing) but use of social distancing has been limited. Hand sanitizers and water for handwashing have been installed in public places and the price of soap and water are subsidized by up to 50 percent. On January 11, 2021, the authorities launched a large-scale testing campaign for 30 days and closed land and sea borders to passengers. The international airport, which reopened on November 8, 2020, imposed new restrictions to arriving passengers, including a seven-day quarantine and two mandatory COVID tests. The authorities’ ongoing pandemic response plan (estimated at US$150 million or 4.6 percent of GDP) focuses on strengthening the health care system and its infrastructure, social safety net, and parts of the road network to facilitate access to sick people. It also includes tax forgiveness to some private companies. The plan’s implementation is however impeded by limited availability of financing beyond a grant from the World Bank (US$5 million) and the first two tranches of CCRT debt relief. Burundi was also granted debt service relief under the DSSI by EXIM Bank China and the Kuwait fund for about $1 million in 2020. The authorities are using domestic resources to boost priority expenditures above pre-COVID projections (Text Table).

Burundi: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Source: Authorities and staff estimates and projections.

Governance safeguards. The authorities remain committed to using the funds provided for COVID measures in the best possible way. A technical committee, overseen by the Minister of interior, was created to manage the response to the COVID-19 pandemic and a fund has been set up to centralize donor financing in a single account at the central bank. In line with commitments in the context of the original CCRT request, the authorities are preparing reports on COVID-related spending and the Court of Auditors is scheduled to undertake an ex-post audit of COVID expenses and publish it on the government’s website within nine months after the end of the fiscal year.

IMF support status. The authorities have requested financial assistance to support their efforts to respond to the COVID crisis. Fund financial support last year entailed two tranches of debt relief under the CCRT (totaling SDR 10.3 million or 6.7 percent of quota). Burundi’s international engagement has been limited and currently there is no Fund-supported program. The last Article IV consultation for Burundi was completed by the IMF Executive Board on August 25, 2014 and the sixth and last review under Burundi’s ECF arrangement was completed on March 23, 2015. In late October 2020, the authorities requested the resumption of Article IV consultations. A virtual staff visit was held in December to update the macroeconomic framework and take stock of the authorities’ response to the pandemic.

Upcoming debt service. Burundi has debt service of SDR 4.16 million falling due to the Fund during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Burundi continues to pursue broadly appropriate macroeconomic policies to address the impact of the pandemic. The authorities have committed to use resources freed by the first and second tranches of Fund debt service relief under the CCRT to continue providing emergency health, social, and economic support to the economy to mitigate the socio-economic impact of the pandemic. However, the fast-rising number of COVID cases poses a risk, notably considering the limited social distancing measures implemented so far.

Table 1.

Burundi: Selected Economic Indicators, 2018–25

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

Fiscal year values (July-June) starting in 2019 (i.e., 2019 is FY 2018/19).

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

Recent Economic Developments. The measured incidence of the Covid-19 pandemic has been very limited since September 2020, with only 10 cases and 0 related death reported in January 2021. This limited incidence, whereas most containment measures have been progressively loosened, reflects in part the discontinuation of widespread testing. The Covid-19 pandemic had a substantial impact on C.A.R.’s economy especially on trade, transportation, tourism and hospitality but appears now somewhat contained (See Staff Report for more details). As a result, growth projections for 2020 and 2021 have been revised to 0 and 3.5 percent, respectively (from 4½ and 5 percent pre-pandemic) and are likely to be revised significantly lower in 2021 in view of the current security situation. 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. The impact of containment measures on economic activity, imports, and tax administration (less controls) had a substantial impact on domestic revenue. Reflecting this revenue shortfall, as well as the lower nominal GDP and the increase in Covid-related spending, the domestic primary fiscal deficit is expected to have exceeded 6 percent of GDP in 2020, compared with the less than 3 percent projected pre-pandemic. Moreover, the overall fiscal balance is projected to decline from 0.2 percent of GDP pre-Covid to -1.3 percent of GDP in 2021. This outlook is expected to be significantly revised downward owing to the deterioration of the security situation since late December.

Public health and macroeconomic policy responses. The government continued to implement the COVID-19 health response plan prepared in collaboration with the WHO, in order to strengthen the country’s capacity to cope with the aftermath of the pandemic. The supplementary budget law adopted in July 2020 channeled the emergency external budget support provided by the Fund and donors to the financing of this response plan and of other measures to alleviate the economic impact of the pandemic. Priority expenditures in 2020 are estimated to have increased to 2.9 percent of GDP, compared to 2.0 percent of GDP before the pandemic. Covid-related spending excluding health expenditure amounted to 1.2 percent of GDP in 2020, including 0.9 percent of GDP for prevention and containment measures and 0.2 percent of GDP in transfers to vulnerable household and enterprises. The authorities plan to continue the implementation of the health response plan in 2021, with priority expenditures amounting to 2.4 percent of GDP, of which 1.2 percent of GDP will be spent on health. Covid-related expenditures represent 0.6 percent of GDP in the 2021 budget law.

Central African Republic: COVID Related Fiscal Measures

(In percent of GDP, unless otherwise indicated)

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If available, latest MT projection before March 1, 2020.

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 funds derived from debt service relief (CCRT) and suspension (G20 DSSI). In the context of the current ECF arrangement, the authorities committed to publish on a monthly basis detailed data on Covid-related expenditures and on public procurement tenders as part of the pandemic response, as well as the outcome of these tenders, including the names of the winning companies, the names of their beneficial owners, and the criteria for their selection. The authorities also agreed to publish the names of enterprises that have benefited from transfers intended to help them deal with the pandemic, and the criteria for their selection. On December 14, 2020, the authorities published an initial list of nine (9) COVID-19-related procurement contracts approved between August 14, 2020, and November 17, 2020. While no subsequent list had been published as of March 3, 2021, the authorities have indicated that no new Covid-related contracts have been signed since the initial list was published. The authorities have also committed to have an ex-post independent audit of Covid-related expenditures by the Court of auditors conducted and published by end-April 2021. The Court has been mandated by the Minister of Finance to do so and has started working on it.

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). Following the Covid-19 pandemic, an SDR 27.85 million (25 percent of quota) disbursement under the RCF was also approve on April 20, 2020. On January 12, 2021, the Executive Board completed the first and second reviews under the ECF. The completion of the reviews enabled the disbursement of SDR 23.87 million (21.4 percent of quota). The third review is tentatively scheduled for June 2021.

Upcoming debt service. C.A.R has debt service of SDR 2.924 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that the C.A.R authorities have sought to pursue sound macroeconomic policies since the onset of the pandemic, against the backdrop of a difficult security situation and its severe impact on the economic activity. Referencing the public health and governance paragraphs above, staff also assesses that the resources freed by the first and second tranches of Fund debt service relief under the CCRT, and other support from the Fund, have been allocated 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, 2018–25

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

Expenditure is on a cash basis.

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

The changes in domestic debt estimates reflect a correction of the estimates reported in the RCF’ staff report tables, which had not been updated. This did not affect the debt sustainability analysis.

Comprises government debt to BEAC, commercial banks, and government arrears.

Annex VI. Chad: Update for CCRT Debt Relief

Recent economic developments. The last quarter of 2020 was no different from other parts of the year with COVID-19 continuing to have a severe economic impact on Chad. Real activity contracted by 0.9 percent over the year as a whole, reflecting lower-than-anticipated oil growth (2.4 percent) and a decline in non-oil activity (-1.6 percent). The non-oil primary balance (NOPB) recorded a deficit of 8.7 percent of non-oil GDP compared to a projected pre-COVID level of 4.9 percent. The deterioration is a result of a decline in non-oil revenues (0.9 percentage point) and an increase in expenditures (3.5 percentage points). In 2021, Chad is expected to embark on a substantial reform program that will bring its NOPB down to -6.9 percent of non-oil GDP, while non-oil economic growth is forecast to remain low at 0.8 percent and inflation is projected at 2.6 percent. Chad has a very low score on the UN Human Development Index at 0.398 and is ranked 187 among 189 countries covered by the index.

Public health and macroeconomic policy response, including on the use of financial resources, freed up by the debt relief. Fiscal measures taken in the revised 2020 budget, equivalent to 3.8 percent of GDP, have been extended into 2021. The 2021 budget law also included tax facilities, particularly to sectors affected by COVID-19. The fiscal package and the tax facilities include:

  • COVID-19 containment and prevention measures are estimated at 0.7 percent of GDP.

  • Measures to help households (0.9 percent of GDP): (i) suspension of payments of electricity and water bills, and (ii) clearance of arrears on death benefits due to deceased civil and military agents, indemnities and ancillary wages owed to retirees, and medical expenses for civilian agents and defense and security forces (iii) a food distribution program with the help of UN agencies; (iv) tax exemptions and simplification of the import process for food and necessity items, including health equipment; and (v) establishment of a Youth Entrepreneurship Fund; (vi) creation of a solidarity fund for the vulnerable population amounting to CFAF 100 billion.

  • Measures to help small- and medium-sized businesses (2.2 percent of GDP): (i) reduction in business license fees and the presumptive tax by 50 percent, and (ii) tax breaks, such as carryforward losses and delays in tax payments, which will be considered on a case-by case basis; (iii) clearance of arrears to suppliers; and (iv) subsidies to agriculture.

  • The tax advantages introduced in 2021 include exonerations of employer’s charges for the recruitment of young graduates, exemption from VAT on many items, particularly on equipment and other agricultural related ingredients, and reduction of charges for enterprises that work in the hotels’ business.

Chad: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Governance Safeguards. The Government is taking steps to ensure transparency in COVID-19 related expenditure in line with its commitments under the second RCF disbursement. Resources dedicated to the COVID-19 will be used in full transparency. In addition to being reflected in the budget law, they will be committed in line with the CEMAC PFM directives. All COVID-19-related expenditures, including emergency spending for urgently needed supplies will be subject to an ex-post compliance audit by a reputable international auditing firm, which will be completed with the support of the Inspectorate of Public Finances within six months of the end of the fiscal year. Auditing reports, also including analysis of compliance with procedures, with regards to regulated agreements, will be published within a month upon completion on the website of the Ministry of Finance and Budget. In addition, the authorities will begin publishing on-line the full text of all COVID-19-related procurement contracts, along with the names of the beneficial owners of awarded legal persons. They will also begin publishing on-line the ex-post-delivery reports for goods and services, including the lists of suppliers and contractors, for all such contracts.

IMF support status. IMF staff completed policy discussions with the authorities on a new medium-term program that could be supported by IMF resources of about $560 million under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF).

Upcoming debt service. Chad has debt service of SDR 4 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Chad 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 first and second tranches 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.

Chad: Selected Economic and Financial Indicators 2020–24

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WEO projections for Brent crude oil price.

Chadian oil price is Brent price minus quality discount.

Changes as a percent of broad money stock at the beginning of period.

Central government, including government-guaranteed debt.

Total revenue excluding grants and oil revenue, minus total expenditure excluding net interest payments and foreign -financed investment.

Annex VII. Union of the Comoros: Update for CCRT Debt Relief

Recent Economic Developments. COVID-19 continues to have a severe economic impact on Comoros. While the number of officially reported COVID casualties remained low in 2020 (at a cumulative total of 823 infections and 7 deaths in a population of 850,000), the economy contracted by 0.5 percent (compared with projections of 4.4 percent growth pre-COVID and of a 1.2 contraction at the time of the April 2020 RCF/RFI request). The contraction reflected mainly lower demand for services due to social distancing and fewer visitor arrivals. Fiscal tensions persisted through much of the year as revenue shrank by 0.5 percent of GDP relative to pre-COVID projections; and grants, while more than expected, came late in the year. Government expenditure shrank by 1.1 percent of GDP in 2020 relative to pre-COVID projections, as higher current spending was more than offset by weak capital expenditure owing in part to capacity limitations and delays in grants. Accordingly, the fiscal cash deficit was lower than anticipated, reaching 0.2 percent of GDP versus pre-COVID projections of 2.2 percent of GDP and RCF/RFI projections of 3.8 percent of GDP, and the debt burden rose by less than expected from its 2019 level.1 External stability benefited from lower oil import prices and higher grants and remittances inflows. In recent weeks, the number of COVID related casualties has risen sharply, to a cumulative 3,571 infections and 144 deaths, likely due to the arrival of a mutated virus. Against the background of vulnerability to mutated virus forms, and limited prospects for vaccinations in 2021, staff now projects zero growth in 2021 compared with projections of 3.5 percent and 3.1 percent, respectively, before COVID and for the RCF/RFI request. The fiscal deficit could reach 3 percent of GDP, reflecting efforts to support the economy, helped in part by the grants received in late 2020. Fiscal and external financing needs will depend on the path of the pandemic in Comoros and abroad: the economy is highly vulnerable to shocks and faces protracted development needs. Data on the evolution of poverty or human development since the outbreak of the pandemic are not yet available.

Public health and macroeconomic policy response. The authorities sought to lessen the pandemic’s health impact, including by imposing social distancing measures, closing the airport for several months, and creating health centers for COVID-19 patients. They sought to lessen the economic impact through various measures, including a temporary reduction in certain taxes. On the spending side, they used about half of the RCF/RFI support for health care and hygiene measures and to support public and private enterprises affected by the crisis.2 They used the remainder of the support for building buffers and for general government purposes, partially offsetting the pandemic’s impact on revenue. However, data constraints prevent a full understanding of trends in social spending (health, education, and social assistance/insurance). In 2020, social spending not specifically related to COVID and financed from domestic resources and donor budget support fell slightly, while data are not available on the evolution of such spending financed from donor project support. The authorities’ plans to raise cash transfers to the poor, supported by the World Bank, suffered delays and were executed only to a limited extent in 2020. In 2021, the authorities plan to increase these transfers, making up for delays in 2020, and to vaccinate at least 20 percent of the population with help from the COVAX initiative.

Governance safeguards. The authorities enhanced reporting and controls for the disbursement of funds provided by the IMF through the RCF and RFI by preparing an advance decree for the spending of these funds and regularizing it ex-post through a supplementary budget law for 2020, with technical assistance from the Fund. The authorities started reporting to Fund staff on the spending of these funds in February 2021, instead of in 2020 as envisaged. The authorities’ intention remains to commission an independent and robust third-party audit of the spending of IMF-provided funds in mid-2021 and to publish its results. The audit has been entered in the work program of the General Inspectorate of Finance. The authorities intend to start publishing documentation on large public procurement projects and their beneficial owners in the coming weeks, which was originally envisaged to start within six months of RCF/RFI approval.3 The authorities report that in view of the need for speed, starting in April 2020 they eased requirements for all public procurement projects related to COVID by allowing restricted calls for expressions of interest.

IMF support status. The Executive Board approved emergency support on April 22, 2020 under the RCF equivalent to SDR2.97 million (16.7 percent of quota) and a purchase under the RFI equivalent to SDR5.93 million (33.3 percent of quota) to meet Comoros’ urgent balance of payment needs from the COVID-19 pandemic.

Upcoming debt service. Comoros has debt service of SDR 653,981, which includes estimates for the GRA charges on the CCRT-eligible debt, falling due to the Fund during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses, based on limited available information, that the Comoros authorities have preserved broad macroeconomic stability and are thus pursuing broadly appropriate macroeconomic policies to address the impact of the pandemic. While data constraints prevent a fuller assessment, staff assesses that the resources freed by the first and second tranches of Fund debt service relief under the CCRT, and other support from the Fund, are being used to help provide health, social and economic support to the economy and to mitigate the impact of the pandemic on lives and livelihoods. With regard to governance-related commitments, staff commends the authorities for preparing advance spending decrees and a revised budget law and welcomes the reporting on spending that has started after some delay. Staff urges the authorities to proceed with the intention to publish procurement-related information.

Table 1.

Comoros: Selected Economic and Financial Indicators, 2019–25

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

Annex VIII. Democratic Republic of the Congo: Update for CCRT Debt Relief

Recent economic developments. COVID-19 continues to have a serious economic impact on the Democratic Republic of Congo (DRC), mostly due to containment measures and the emergence of a second COVID-19 wave in the last quarter of 2020. By contrast, no major mine was shut down in the context of a limited spread of COVID to the mining regions. The continuous increase in copper prices after a rapid rebound and the recovery of world demand have led to higher mineral production than projected at the beginning of the pandemic and have contributed to contain the impact on economic growth (Table 1). Overall, real GDP is estimated to have contracted by 0.1 percent in 2020 and would expand by 3.8 percent in 2021, compared to projected pre-virus growth rates of 3.2 and 3.5 percent in 2020 and 2021, respectively. Non-extractive GDP is projected to have contracted by 2.1 percent in 2020, reflecting a weaker services sector and lower public investment. On the fiscal front, weak tax revenues and increased social spending led to a sizable fiscal deficit of 1.6 percent of GDP in 2020 (compared to a pre-COVID projection of a 0.6 percent of GDP), initially financed mostly by advances from the central bank and, from April 2020 onwards, by a Rapid Credit Facility (RCF) disbursement and other donors’ support. In 2020, the pandemic led to combined losses in revenue and grants of 3.6 percent of GDP and higher public health outlays of 0.1 percent of GDP partly compensated by reductions in other spending. For 2021, the projected fiscal deficit is 1 percent of GDP, a similar figure to the pre-COVID projection. The net shock to the balance of payments (financing gap) is estimated at about US$ 380 million, or 0.8 percent of GDP for 2020, and US$ 530 million in 2021, or 1 percent of GDP. Public debt projections have not been significantly affected by the pandemic. DRC is a fragile state, ranked 175 out of 189 countries in human development according to the UNHDI. The authorities’ efforts to reduce poverty and promote economic development have been significantly affected by the pandemic.

Public health and macroeconomic policy response, including on the use of financial resources freed up by the debt relief. At the outset of the pandemic, the government adopted a COVID-19 national response plan with an estimated cost of US$138 million (0.3 percent of GDP), including some off-budget outlays. Several key measures included temporary VAT exemptions on pharmaceutical and basic goods, a grace period for tax arrears, and targeted free provision of water and electricity. In 2020, the increase in COVID-related health spending (effected through the budget) amounted to 0.1 percent of GDP. Most health-related expenditures are off-budget as they are funded by external donors. In addition, transfers to households amounted to 0.1 percent of GDP. Some additional marginal amounts were also spent on confinement and security measures. A similar increase in health spending is projected for 2021. The government continues with the implementation of its free education initiative despite financing constraints. The April 2020 RCF, other donors’ support, and debt relief are projected to cover mostly the 2020–21 government revenue losses associated with the pandemic.

Democratic Republic of Congo: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Governance safeguards. The authorities produced and published a revised 2020 treasury plan reflecting the expected impact of the pandemic and additional support from development partners They started to include COVID-19 related expenditures in their monthly budget execution reports. The authorities are reporting on the nature and amount of the COVID-19 related expenditures on a monthly basis. The authorities have also committed to publish all COVID-19 related procurement contracts that exceed US$12,000 and disclose beneficial ownership information for contracts exceeding US$1 million but have not yet provided an update on the status of these publications. The General Finance Inspectorate is undertaking a specific audit of COVID-19 related expenditures. Additionally, the annual report of the Audit court will include a special audit on COVID-19 related expenditures.

IMF support status. On April 22, 2020 the Board approved an RCF of SDR 266.5 million, or 25 percent of quota. This disbursement followed a first RCF disbursement approved in December 2019, which was coupled with a Staff-Monitored Program (SMP) through end-May 2020. The authorities have requested a three-year Extended Credit Facility (ECF). Tangible political commitment to implementation of sound economic policies and governance and structural reforms are prerequisites for a Fund-supported program.

Upcoming debt service. DRC has SDR 4.9 million debt service falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that DRC is pursuing appropriate macroeconomic policies to address the global pandemic. Monetary policy was tightened substantially to contain inflation and exchange rate depreciation, while budget execution has been aligned to available funding to avoid recourse to central bank advances. Preliminary data would support the view that resources freed by the first and second tranches of Fund debt service relief under the CCRT 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.

Democratic Republic of Congo: Selected Economic and Financial Indicators, 2018–26

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

Annex IX. Djibouti: Update for CCRT Debt Relief

Recent Economic Developments. After a brief surge in COVID cases in May 2020, the authorities have successfully contained the spread of the virus since June. Domestic demand initially contracted on strict containment measures, but quickly rebounded as the economy reopened. The pandemic also initially slowed port activity, which has since recovered, and exports from the free trade zones have accelerated. The short period of economic disruption, together with a COVID response of about 2 percent of GDP, limited the economic contraction in 2020 to 1 percent, compared to a pre-COVID projection of 7 percent growth. Nevertheless, lower growth has resulted in higher debt ratios. Assuming the virus remains contained, Djibouti is set to recover in 2021 with growth projected to return to 5 percent, supported by international trade and strong growth in Ethiopia, its most important trading partner. Modest additional fiscal support in 2021 will reinforce the recovery, but the outlook remains highly dependent on the evolution of the virus, and near-term growth is likely to remain below pre-COVID projections.

Public health and macroeconomic policy response, including on the use of financial resources freed up by the debt relief. The authorities responded swiftly by putting in place strict containment and mitigation measures and allocated US$88.3 million, equivalent to 2.6 percent of GDP, towards COVID-related expenditures through a supplementary budget. Of this amount, 2.1 percent of GDP was spent in 2020, including on job protection measures, cash transfers, deferral of social and corporate tax contributions, and deferral of loan repayments. With the stabilization of cases and ongoing economic recovery, the authorities plan to maintain modest COVID-related spending of 0.6 percent of GDP in support to households and businesses in 2021. This spending will be offset by cuts to other current expenditures and measures to broaden the tax base.

Djibouti: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Note: The authorities were not able to provide data on priority expenditures.

Governance safeguards. COVID-related spending in 2020 and 2021 was legislated through regular budget procedures, promoting transparency in resource allocation. As part of their commitments under the May 2020 RCF, the authorities are preparing to commission an external audit of COVID-related spending and will publish the results later this year. Regarding the commitment to publish procurement contracts of COVID expenditures and the beneficial ownership of the selected companies, the authorities informed staff that all contracts have so far fallen under the US$100,000 threshold for publication.

IMF support status. On May 8, 2020, the Board approved disbursements under the RCF for SDR 31.8 million (US$43.4 million, 100 percent of quota) and the CCRT for SDR 1.692 million. On October 2, 2020 additional CCRT support was approved under the second tranche for SDR1.692 million. Djibouti is also a beneficiary of the Debt Service Suspension Initiative (DSSI) and has applied for the extension of the initiative.

Upcoming debt service. Djibouti has debt service of SDR 1.397 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the third tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Djibouti is pursuing appropriate macroeconomic policies to address the pandemic. In light of the authorities’ commitment to mitigate the negative impact of the crisis in a transparent manner, staff also assesses that the resources freed by the first and second tranches of Fund debt service relief under the CCRT are being used to help provide emergency health, social and economic support to the economy.

Table 1.

Djibouti: Selected Economic and Financial Indicators, 2018–26

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Sources: Djibouti authorities, IMF staff estimates and projections, UNDP, World Bank.

Current account balance excluding imports and exports associated with re-export activities.

Annex X. The Federal Democratic Republic of Ethiopia: Update for CCRT Debt Relief

Recent Economic Developments. The Ethiopian authorities responded early and forcefully to the onset of the pandemic, declaring a 5-month state of emergency on April 8. COVID cases declined steadily after peaking in August 2020, even as containment measures were relaxed. A second wave of the pandemic hit Ethiopia starting in late January 2021, with a marked pick-up in new cases. Real GDP growth for 2020/21 has been revised up from zero percent (2nd tranche CCRT update) to 2 percent on the back of a positive growth surprise for 2019/20 (6.1 percent, against the earlier projected 1.9 percent, as the two largest sectors – agriculture and construction –remained largely unaffected by the pandemic), though growth remains well below past trends due to the lingering effects of the pandemic on non-agricultural activity, locusts infestation’s adverse impact on agricultural activity and domestic security challenges.1 Growth for FY 21/22 is projected to rebound to 8.7 percent, mainly driven by the assumption that the pandemic will be globally contained. Fiscal policy turned slightly expansionary in 2019/20, with the deficit rising modestly to 2.8 percent of GDP, as the authorities cut or deferred other current spending to accommodate additional COVID-related measures (mainly on health and emergency social assistance, amounting to 1.6 percent of GDP) to achieve a smaller-than-projected deficit. Sharply lower imports and higher-than-projected merchandise exports offset a lower-than-expected decline in services exports and remittances, leading to a narrowing of the current account deficit to 4.1 percent of GDP. However, shortfalls in foreign direct investment, and lower loan disbursements to SOEs offset most of the improvement in the current account, resulting in unchanged reserves.

Ethiopia: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Projections at program approval in December 2019. Fiscal year starts from July 8 of a calendar year to Jul 7 next year.

Measures include transfers and tax amnesty on interests and penalty for tax debt.

Public health and macroeconomic policy response, including on the use of financial resources freed up by the debt relief. In May 2020, the authorities approved supplementary budget allocations of around 0.5 percent of GDP to cover COVID-related healthcare spending needs, and 1 percent of GDP to meet humanitarian needs accentuated by the crisis (primarily emergency food distribution and sanitation). In addition, the authorities introduced temporary tax reliefs aimed at alleviating pressures on businesses, mainly in the form of deferral of tax liabilities and amnesty on interests and penalties on tax debt. Spending and tax measures led to only a modest 0.3 percent of GDP widening of the deficit in FY2019/20 relative to pre-pandemic projections at program approval, amid some scaling back of planned capital expenditure. For 2020/21, the authorities envisage a supplementary budget with a larger 3.3 percent-of-GDP deficit (relative to the ECF-EFF program approval deficit target of 2.5 percent) to finance pandemic-related spending and additional spending on humanitarian assistance and reconstruction needs resulting from the security operations in Tigray.

Governance safeguards. Tenders for public contracts (primarily for healthcare supplies, personal protective equipment, and humanitarian support goods) have usually been carried out through a competitive bidding process, in accordance with national procurement law, and bidding documents are published online.2 The limited tax relief provided to businesses during the crisis was enacted transparently through a published regulation by the Council of Ministers and a directive by the Ministry of Finance, with the impact of the measures fully reflected in the budget. All funds secured from donors in 2019/20 were included in the approved supplementary budget, and a directive was issued to ensure that all mobilized resources (including the government’s own sources) are accounted for and managed transparently. Monitoring of COVID-19 spending is led by a steering committee chaired by the deputy Prime Minister, while a technical committee chaired by Ministry of Finance has been established to monitor all budgetary processes from allocation to audit. An ex-post audit by the Auditor General over COVID-19 related measures during FY2019/20 is underway and is expected to be completed by September 2021.

IMF support status. Ethiopia’s 3-year program under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangements, with a total access of 700 percent of quota, was approved by the Board on December 20, 2019. Ethiopia’s request for assistance from the Fund under the RFI in the amount of 100 percent of quota (SDR 300.7 million or about US$411 million) and debt relief under the CCRT were approved by the Board on April 30, along with a reduction in EFF access by 50 percent of quota to comply with then applicable annual access limit policies. The first and second reviews under the ECF/EFF arrangements are expected to be discussed at the Board in the coming weeks.

Upcoming debt service to the IMF. Ethiopia has debt service estimated at SDR 471,500 in the form of GRA charges falling due during the interval from April 14 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Ethiopia is pursuing appropriate macroeconomic policies as it responds to the health and economic impacts of the global pandemic. As discussed in the public health and governance paragraphs above, staff also assesses that the resources freed by the two tranches of Fund debt service relief under the CCRT, and other support from the Fund including under an exceptional access ECF/EFF, 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.

Data Assessment: The estimates of COVID-19 related measures are preliminary. The total estimates are provided by the authorities with some breakdowns and staff has made estimates on sub-categories based on available information to the extent possible. There are gaps in the quality of the data, but staff considers the data are broadly in line with the authorities’ announcement. The authorities are undertaking an audit by the Auditor General on the COVID-19 related measures and some estimates may be revised.

Table 1.

Ethiopia: Selected Economic and Financial Indicators, 2018/19–2025/26

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Sources: Ethiopian authorities and IMF staff estimates and projections.

The base is December 2016.

Based on data from Central Statistical Agency (CSA), except for the current account balance, which is based on balance of payments (BOP) data from National Bank of Ethiopia (NBE).

Public and publicly guaranteed external debt, which includes long-term foreign liabilities of NBE and external debt of Ethio-Telecom.

Prog. columns refer to pre-COVID projections as of December 2019.

Annex XI. The Gambia: Update for CCRT Debt Relief

Recent Economic Developments.1 The pandemic continues to have severe implications on the Gambian economy as the infection rate is increasing due to the second COVID-19 wave, despite the containment measures taken by the authorities. Economic growth in 2020 is estimated at 0 percent, which is weaker than the pre-COVID projection of 6.3 percent, but stronger than the -1.8 percent growth rate projected at the time of the previous CCRT update in October 2020. The upward revision in 2020 GDP growth is predicated on a rebound in agriculture (spurred by favorable weather conditions) and vigorous activity in construction and commerce (supported by strong private FX inflows) which attenuated the negative impact of tourism on growth. Growth is projected to rebound to 6 percent in 2021. Inflation subsided from 7.7 percent (y/y) at end-2019 to 5.7 percent at end-2020, reflecting weak domestic demand and stability in the dalasi. The authorities managed to limit the impact of the crisis on public finances; domestic revenue mobilization held up, public spending was contained, but project grants fell short of pre-COVID projections. The overall fiscal deficit inched up by 0.2 percentage point of GDP relative to pre-COVID projections, to 1.9 percent of GDP. The 2021 budget includes strong one-off measures to contain a resurgence of the pandemic and support economic recovery, leading to an expected increase in the overall deficit to 3.9 percent of GDP, compared to a pre-COVID projection of 1.8 percent of GDP. Compared to the previous CCRT update, the current account deficit in 2020 declined to 5.5 percent of GDP, as increased inflow of remittances mitigated the deterioration in the current account balance due to a halt in tourism. Gross official reserves at end-2020 stood at US$352 million, or 4.9 months of prospective imports. External financing needs are projected to be about 5 percent of GDP in 2021.

Public health and macroeconomic policy response. The authorities’ response continues to be focused on (i) containment and mitigation measures, especially given the recent uptick in cases; (ii) upgrading of the health and education systems to strengthen first response and ensure social distancing; (iii) support to vulnerable households; and (iv) support to businesses, especially in the tourism sector. Staff estimates priority expenditures at 6.6 percent of GDP in 2020 (2.3 percent of GDP higher than pre-COVID projections and including 3.5 percent of GDP in COVID-related spending) mainly due to social and health spending, notably to provide food relief to vulnerable households and purchase essential health supplies. However, priority expenditures are 0.8 percent of GDP lower than in the October update as the authorities tried to keep some fiscal prudence while addressing the pandemic. Priority expenditures in the 2021 budget are projected to decrease to about 4.0 percent of GDP—as the authorities allocate more resources to infrastructure projects to support the economic recovery. The Gambia is part of the African Union COVAX initiative and the authorities are working with the World Bank on a US$8 million (0.4 percent of GDP) project to procure and rollout COVID-19 vaccines, which would bring the projected priority spending in 2021 to 4.4 percent of GDP.

The Gambia: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

The 2021 figure is the difference between current and pre-COVID projections of subsidies and transfers.

Revenue loss estimated as the difference between current revenue and pre-COVID projections.

Governance safeguards. In early 2020, a dedicated account was opened and a committee comprising all actors involved in the budget execution process was set up to execute the COVID-19 spending. This spending was published as part of the monthly expenditure reports on the website of the finance ministry; details of COVID-19 procurement contracts from March–October 2020, including the beneficial owners of successful bidding companies were published on the website of the Gambia Public Procurement Authority. All subsequent emergency appropriations were included in the 2020 supplementary appropriation bill and the 2021 budget approved by the National Assembly following extensive public debates. The internal audit at the Ministry of Health has been strengthened and the National Audit Office (NAO) launched in September an independent audit of the COVID-19 spending covering January-August 2020. The NAO will complement this audit with the COVID-19 spending covering the remainder of 2020 with a view to produce a full audit report along with the audit of the 2020 accounts by end-September 2021. To foster transparency, the authorities have entrusted the World Food Program to carry-out the distribution of the second phase of the government-funded COVID-19 food relief program.

IMF support status. The IMF Executive Board approved in March 2020 a 39-month ECF arrangement in the amount of SDR 35 million (56.3 percent of quota), which was followed in April 2020 by the approval of a COVID-19 emergency support under the RCF in the amount of SDR 15.55 million (25 percent of quota). In January 2021, the IMF Executive Board completed the first review of The Gambia’s performance under the ECF arrangement and also approved an augmentation of access under the program from SDR 35 million to SDR 55 million (88.4 percent of quota). The discussions for the second ECF review are planned for 2021Q2.

Upcoming debt service. The Gambia has debt service of SDR 1.866 million falling due from April 14, 2021 to October 15, 2021, the period covered by the third tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that The Gambia is pursuing appropriate macroeconomic policies to address the global pandemic. Staff also assesses that the resources freed up by the first and second tranches 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 mitigate the impact of the pandemic on lives and livelihoods of the population. Finally, staff assesses that the quality of authorities’ data submission could be improved, taking into account capacity constraints; this would improve staff’s capacity to make a fuller assessment.

Table 1.

The Gambia: Selected Economic and Financial Indicators, 2019–26

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Sources: The Gambian authorities; and IMF staff estimates a nd projections.

Annex XII. Guinea: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic continues to have a severe impact on Guinea’s non-mining activities. Measures imposed by the government to contain the spread of the virus adversely affected sectors such as retail trade, transport, and tourism. While there are no indications of a second wave for the time being, a new Ebola outbreak emerged in mid-January with 6 active cases and 5 deaths reported as of February 22, 2021. The pandemic has also exacerbated poverty and inequality levels. Preliminary World Bank survey data point to a worsening in the living conditions of the most vulnerable households and workers in the informal sector. Nonetheless, the mining sector, particularly bauxite and artisanal gold, was more resilient than expected. The boost in mining production offset the relative decline in the non-mining sector, with the result that GDP growth held up at 5.2 percent in 2020, only 0.6 percent below the 5.8 percent projected prior to the pandemic. The increase in mining activity did not translate into higher tax revenues due to exonerations, exemptions, and the untaxed nature of artisanal gold activities. The overall fiscal balance is projected to have reached -3.6 percent in 2020, reflecting a relaxation compared to pre-crisis projections of -3 percent to accommodate the response plan to the crisis and revenue shortfalls arising from COVID-induced constraints to tax collection capacity. A significant balance of payments financing gap emerged during 2020—reflecting imports needed for the pandemic response amid weak FDI—and was met through significant support from the international community, including US $246 million from the Fund (including $25 million from the CCRT) and US $32 million from the DSSI.

Growth is expected to reach 5.6 percent in 2021, against a pre-pandemic projection of 6.2 percent, supported by the continuation in the production ramp-up of bauxite and iron ore and a gradual recovery in non-mining activities as COVID-related effects subside. The overall fiscal deficit is projected at 2.3 percent of GDP in 2021, versus the pre-pandemic projection of 4 percent, as the response plan measures wind down and lower than pre-pandemic capital expenditure is projected. The 2021 budget is fully financed as approved; however, work is ongoing to include the expenditure related to vaccines in the budget, for which financing is still not identified. The CCRT third tranche of debt service relief will contribute 0.2 percent of GDP to the financing of the approved 2021 budget. Relative to 2020, the external financing gap is estimated to be more modest in 2021, with the balance of payments supported by a strong export sector and the unwinding of pandemic support measures, reaching about US $70 million expected to be covered by support from the CCRT and DSSI operations. While the December 2020 Debt Sustainability Analysis concluded that Guinea remains at moderate risk of debt distress, the pandemic has raised the path of public debt and limited the space for additional borrowing above the baseline.

Public health and macroeconomic policy response. The National Emergency Preparedness and Response Plan built on the country’s experience from the Ebola virus pandemic of 2014–2015. The total budgetary cost of the plan was 1.7 percent of GDP, of which about 70 percent was spent through September last year. The largest share of the plan (0.7 percent of GDP) went toward the health component, with a focus on improving surveillance infrastructure, as well as purchases of medical services and equipment. To bolster social support, the authorities built food stocks, provided utility subsidies to households, and increased cash transfers. However, the cash transfer project suffered delays, as it took longer than expected for the authorities to meet the conditions for World Bank external financing for this initiative. It is now projected to take place in early 2021. The fiscal cost of social sector support is estimated at 0.6 percent of GDP. The remainder of the funding went to the private sector, including tax exemptions for health equipment, support to the hospitality sector, and support for farmers. About 15 percent of the private sector support went toward the creation of a special fund to provide financing and loan guarantees to firms, with a focus on SMEs. Apart from fiscal measures, the central bank lowered its policy rate and the reserve requirements to support liquidity in the banking sector. Prudential regulatory measures include a reduction in the liquidity coverage ratio, a suspension of the NPL classification and provisioning of loans to the most affected sectors, and a moratorium on supervision-related fees and contributions to the deposit insurance scheme. The central bank also eased identification requirements for electronic money accounts.

Guinea: COVID Related Fiscal Measures 1/ 2/

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Government periphery is central government.

Projections are from the 4th ECF Review Staff Report, which was published 18. March 2020.

Initial Budget Law (LFI).

Combined 5th & 6th ECF review projection. Equals LFI, as LFI was discussed during ECF mission.

Governance safeguards. The authorities followed through on multiple governance commitments on COVID-19-related spending. They created a budgetary fund to account for all earmarked external and domestic COVID-related resources. They established a dedicated account, as part of the Treasury Single Account at the central bank, to receive and disburse COVID-19 funds. They also published monthly reports on the execution of COVID-19 related spending. The inspectorate-general for finance will conduct an ex-post control of high-risk expenditures, with the involvement of civil society. The authorities also publish all awarded procurement contracts for COVID-19-related projects, including the names of entities and their beneficial owners (available here). Finally, the Court of Accounts is conducting a full audit of COVID-19 spending (including ex-post validation of goods and services procured), which will be published online by June 2021.

IMF support status. In June 2020, the Board approved a disbursement of SDR 107.1 (50 percent of quota) under the Rapid Credit Facility. In December 2020, Guinea successfully completed its second ECF arrangement, combining the fifth and six review. An Article IV consultation is expected to be completed by June 2021.

Upcoming debt service. Guinea has debt service of SDR 18.207 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Guinea is pursuing appropriate macroeconomic policies to address the effects of the pandemic. The authorities swiftly implemented their COVID response plan and contagion mitigation measures. Based on information available, Staff believes that the resources freed by the CCRT debt service relief, and other support from the Fund, are being used to respond to the health and socio-economic crisis by mitigating the impact of the pandemic on the lives and livelihoods of the population.

Table 1.

Guinea: Key Economic and Financial Indicators, 2018–26

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Sources: United Nations Human Development Index, Guinean authorities; and Fund staff estimates and projections.

In percent of the broad money stock at the beginning of the period.

In months of the following year’s imports excluding imports for large foreign-financed mining projects.

Annex XIII. Guinea-Bissau: Update for CCRT Debt Relief

Recent Economic Developments.1 COVID-19 continues to have a severe impact on Guinea-Bissau, a fragile state with long-standing economic challenges. In addition to the effects of the containment and lockdown measures on domestic activity, border closures and limited circulation delayed the launch of the 2020 cashew campaign, severely impacting the agriculture sector. After the economy contracted by 2.4 percent in 2020, a modest recovery by about 3 percent is projected for 2021, still short of the pre-COVID forecast of 5 percent. This partial rebound is expected to be driven by a recovery of cashew exports and public investment, as well as increased consumption due to the gradual lifting of containment measures. Whereas in 2020 the fiscal and current account deficits widened to an estimated 9 and 10.1 percent of GDP respectively, in 2021 fiscal consolidation efforts (2.8 percent of GDP reduction in the domestic primary balance) and the gradual improvement of external conditions are expected to lead to lower but still significant deficits, estimated at 5.1 and 6.5 percent of GDP, respectively. Total public debt increased to 78.1 percent of GDP in 2020 and is expected to remain around that level in 2021. The CCRT third tranche of debt service relief will contribute 0.1 percent of GDP to close 2021 financing gaps. This outlook remains highly vulnerable to a deeper or more prolonged duration of the pandemic, a weaker recovery in the international cashew nut market and adverse terms-of trade. The pandemic is set to have scarring effects on poverty (about 67 percent of the population was living below the poverty line of US$1.90 per day before the pandemic). Guinea-Bissau ranks 175 out of 189 countries on the UN Human Development Index (2019).

Public health and macroeconomic policy response, including on the use of financial resources freed up by the debt relief. A state of calamity was declared in January 23, 2021 for 30 days in response to signs of a second wave as weekly new COVID-19 cases exceeded 100.2 The increase in total priority spending, other COVID-related spending and on-lending in response to COVID-19 amounted to 6.2 percentage points of GDP in 2020 and 2.4 percentage points of GDP estimated in 2021. In 2020 the expected execution of expenditures in the health sector amounted to 4.6 percent of GDP, well above the previously projected 1.4 percent of GDP. Additional health measures included upgrading the existing hospital capacity and equipment (estimated at 2.6 percent of GDP). The 2021 projected health budget (3.4 percent of GDP) is 2.1 percentage points of GDP above pre-shock estimates. Social spending also increased as a share of GDP in 2020 and 2021 as compared to pre-COVID projections, partially due to additional transfers to vulnerable families. Furthermore, the government in 2020 launched a program to support the financing of the critical cashew nut campaign by on-lending resources (1.8 percent of GDP) through the banking sector, which helped secure continued employment in this critical sector. The authorities are seeking international donor support for vaccination. The regional central bank (BCEAO) remains ready to satisfy banks’ demand for liquidity at a fixed rate and, in December 2020, instructed WAEMU banks to refrain from distributing dividends with a view to strengthening capital buffers in anticipation of the impact of the crisis on asset quality.

Guinea-Bissau: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicate)

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Staff’s estimate.

Most recent projection before March 1, 2020.

Governance safeguards. The authorities published the 2019 IMF Report on Governance and Anti-corruption3 and implemented several of its recommendations. COVID-19 related funds, managed using a dedicated account at the BCEAO, will be subject to an ex-post independent audit by a reputable third-party auditor who will work jointly with the audit court is planned to start in the first semester of 2021. However, the audit process has not yet started, and the Terms of Reference have yet to be developed; as such, this commitment has not been implemented. The entire crisis-related spending is an integral part of the State Budget, so that reports on such spending have been published in the budget execution report presented to the National Assembly. The country published, through the High Commissioner for COVID-19, key information of all crisis-related contracts committed to publish in the year 2020, but the full text of contracts and ex-post validation of delivery reports remain to be published. The authorities also have yet to implement commitments to disclose the beneficial ownership information of companies awarded COVID-19 related contracts.

IMF support status. A request for a Rapid Credit Facility (RCF) of SDR 14.2 million (50 percent of quota) was approved by the Board on January 25, 2021. In December 2020, the authorities requested to join the Debt Service Suspension Initiative (DSSI) as well as a Staff Monitored Program (SMP), to build track record towards an upper-credit-tranche (UCT) quality program.

Upcoming debt service. Guinea-Bissau has debt service of SDR 1.122 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Guinea-Bissau is pursuing appropriate macroeconomic policies to address the global pandemic. Based on the above information on public health and governance safeguards, the staff also assesses that the resources freed by the first and second tranches of the 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 severe impact of the pandemic on life and livelihood of the population.

Table 1.

Guinea-Bissau: Selected Economic Indicators, 2019–26

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Sources: Guinea-Bissau authorities; and IMF staff estimates and projections.

Annex XIV. Haiti: Update for CCRT Debt Relief

Recent Economic Developments. There have been about 12,150 confirmed COVID-19 cases in Haiti, a country of 11.3 million people, considerably less than expected. Reported COVID-related deaths have stabilized at about 250 since mid-2020. The global pandemic hit Haiti’s export sector and private demand, aggravating the economic contraction in 2019 that was related to political and social unrest. Real GDP is estimated to have contracted by 3.7 percent in FY2020 (ending September 30) and is expected to recover by only 1.0 percent in FY2021.1 In this context, the poverty rate at the international poverty line (US$1.90 per day) is estimated to have risen to 27.3 percent from 25.9 percent in 2019 (World Bank).

Weaker external demand, particularly in the U.S., led to a drop in Haiti’s goods exports by 26 percent in FY2020. However, a contraction in imports by almost 17 percent and unexpected surge in remittance inflows by 17 percent helped boost the current account to a surplus of 5.5 percent of GDP. Together with emergency financing support from the IMF, this helped support foreign reserves, which remained well above 5 months of imports. Aside from increased spending to address COVID-related needs (see below), other budget outlays were largely contained due in part to a decline in domestic revenue collection by 0.3 percent of GDP to 6.3 percent of GDP and the absence of fiscal financing sources. Monetary financing, which covered most of the fiscal deficit in FY2020, contributed to average inflation of 22.9 percent. Risks to the outlook are significant: a large appreciation in the exchange rate in September and its subsequent stability have been followed by the emergence of a parallel market rate. Monetary financing remains the main source of fiscal financing and poverty and security conditions remain dire. Risks surrounding the global recovery and ongoing political uncertainty will continue to weigh on growth. A constitutional referendum is planned some time before the first round of presidential elections in September; an uptick in social unrest in recent weeks reflects ongoing opposition to the government and this plan.

As the spread of COVID-19 was much lower than expected, the authorities spent less on COVID-related needs than anticipated. Of the HTG 18.2 billion (1.3 percent of revised GDP) allocated in April for COVID-related spending, actual expenditures amounted to HTG 8.4 Bn (0.6 percent of GDP). Most of this (HTG 5.6 billion) was dedicated to health, while transfers to households, businesses and schools were trimmed to HTG 2.3 billion from HTG 8.3 billion. Nonetheless, the level of spending on health, education, and social protection combined was well above pre-COVID-19 projections―by 0.6 percent of GDP. In FY2021, planned spending in these areas is forecast to rise slightly to 2.4 percent of GDP. In that respect, while additional CCRT debt relief supported an expansion of COVID-19 spending, the authorities appropriately adjusted the size of the package to the evolution of the pandemic. Future resources should provide support to the announced post-COVID recovery plan.

Governance safeguards. The authorities tracked and monitored COVID-related expenditures, publishing four different reports in April, May, and September 2020 and January 2021. The reports track spending by ministry, project, and economic nature, but they were in a summary format without specific or standardized budget categories. The source of funding was not specified and actual spending was not matched with a description of the effective delivery of the goods and services provided. In this respect, a thorough ex-post financial and operational report remains necessary. The authorities indicated that this audit would be undertaken by the supreme audit institution in the coming months. The government recently requested technical assistance to strengthen the transparency of public procurement processes, including incorporating requirements for beneficial ownership information.

Haiti: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Fund support status. Haiti does not currently have an IMF arrangement and has outstanding debt to the IMF of SDR 128.3 million. The country received emergency financing support in April 2020 under the RCF of SDR 81.9 million, raising amounts due to the Fund to 78 percent of quota (January 2021) from 33 percent in March 2020. A Staff Monitored Program (SMP) was negotiated ad referendum in May but could not be approved because two prior actions related to governance were not implemented.

Upcoming debt service. Haiti has debt service of SDR 4.0 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Notwithstanding challenges, particularly with respect to the containment of monetary financing and functioning of the foreign exchange market, the authorities have succeeded in maintaining broad macroeconomic stability and addressing needs posed by the COVID-19 pandemic. Staff assess that the resources freed by the first and second tranches of the Fund debt service relief under the CCRT 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.

Haiti: Selected Economic and Financial Indicators, FY2018–22

(Fiscal year ending September 30)

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Sources: Ministry of Economy and Finance; Bank of the Republic of Haiti; World Bank; United Nations; Fund staff estimates and projections. Note: Pre COVID-19 projections are from the 2019 Article IV Consultation. The GDP series was rebased in October 2020, which raised nominal GDP in gourdes by 65 percent in FY2019 (latest available).

Includes transfers to the state-owned electricity company (EDH).

In percent of exports of goods and nonfactor services. Includes debt relief.

Annex XV. Liberia: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic continues to adversely affect the Liberian economy. Activity in 2020 is estimated to have contracted by 3.0 percent, reflecting protracted COVID-19 restrictions that harmed the service sector and the initial slump in iron ore prices weighing on the mining industry. The recovery in 2021 will likely be lackluster, leaving the level of real GDP 4.7 percent below pre-COVID-19 projections. Coming on the heels of economic stagnation during 2018–19, the COVID-19-related economic and social disruptions further aggravate the human development situation. According to the World Bank, the share of the population living below the national poverty line has likely risen from 56 percent in 2019 to at least 65 percent in 2020. School closures impaired the education of the majority of Liberian students. Public finances came under pressure from COVID-19-related spending needs and a weakening of the revenue base. However, the reallocation of spending, efforts to improve tax compliance, and the introduction of a fuel excise tax kept the deterioration of the overall fiscal balance (excl. project aid) to 0.7 percent of GDP in FY2020 and 1.7 percent of GDP in FY2021. The economic shock from the pandemic opened an external financing gap of 5.6 percent of GDP. The effect on public debt dynamics has been limited. Liberia’s debt distress rating remains assessed at high for total public debt and at moderate for external public debt.

Public health and macroeconomic policy response The authorities’ response to the pandemic included gathering all available resources, reallocating expenditure, and increasing expenditure in priority areas. For FY2020 and FY2021, COVID-19-related spending is estimated at 2.5 percent of GDP and 3.1 percent of GDP, respectively.1 It comprises: (i) increases in health and education spending (0.4 percent of GDP), (ii) an expansion of social programs, including the distribution of food aid (2.8 percent of GDP), and (iii) other COVID-19-related spending (2.3 percent of GDP), including cash transfers. Of the total COVID-19 related spending of 5.6 percent of GDP for both fiscal years, 2.5 percent of GDP has been realized in FY2020 and the 3.1 percent of GDP envisaged for FY2021 are still being implemented.

Liberia: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Sources: Liberian authorities, and IMF staff estimates.

Fiscal year is from July to June.

Governance safeguards. The authorities have made great strides to improve accountability and fiscal transparency. These include: (i) publishing information on procurement contract awards on the Public Procurement and Concessions Commission’s website, including information on the legal owners of awarded companies, from March 2021, (ii) increasing the scope of public expenditure being processed through the Integrated Financial Management Information System, (iii) moving from annual to quarterly expenditure reconciliation; and (iv) posting summary fiscal reports on the Ministry of Finance and Development Planning’s website from June 2020. Audit of FY2020 crisis spending by the General Audit Commission is near completion. The FY2021 audit is scheduled to follow early next year.

IMF support status. On December 11, 2019, the Executive Board approved a four-year arrangement under the Extended Credit Facility in the amount of SDR 155 million (US$213.6 million, 60 percent of quota). The first and second reviews were completed on December 21, 2020, enabling a disbursement of SDR 18 million (US$48.86 million), with US$38 million on-lent to the government. In June 2020, Liberia also benefitted from a disbursement of SDR 36.176 million (US$50 million) under the Rapid Credit Facility.

Upcoming debt service. Liberia has debt service to the Fund of SDR 11.483 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Liberia is pursuing appropriate macroeconomic policies to address the global pandemic and that resources freed by the first and second tranches 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 lives and livelihoods of the population.

Table 1.

Liberia: Selected Economic and Financial Indicators, 2018–26

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

Central government operation is based on a commitment basis and refers to the budgetary central government operations and off-budget projects. Fiscal year refers to July 1 to June 30.

Ratios are calculated using external debt (in USD) evaluated at the end of period exchange rate over GDP (in USD) evaluated at the period average exchange rate.

Including the central government debts from the Central Bank of Liberia.

Projections for reserves assume that the remaining financing gap will be filled by donor financing, including possibly from the RCF, and other sources.

2020 CPI inflation is measured excluding health and education sub-index due to measurement issues.

Annex XVI. Republic of Madagascar: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic continues to have a severe economic impact on Madagascar. Official statistics indicate that the total number of people affected by the pandemic is less than 20,000 people (0.1 percent of the population) with less than 300 fatalities, but there are concerns about reduced testing and data quality. Real GDP is estimated to have contracted by 4.2 percent in 2020 (9 percentage points lower than the January 2020 Article IV projection), reflecting a worse global environment impacting tourism, manufacturing, and textile exports; the closing of the country’s largest mine since mid-April 2020; and lower domestic demand impacted by lockdowns and associated reductions in income. Due to the decline in economic activity and tax exemptions to mitigate the impact of the pandemic, tax revenue fell by 1.4 percentage points of GDP y-o-y in 2020 to 8.9 percent of GDP; and the domestic primary balance turned from a small surplus in 2019 to a deficit of about 2.6 percent of GDP in 2020. The current account deficit significantly widened to an estimated 6.5 percent of GDP in 2020, largely due to a collapse in tourism receipts. Two RCF disbursements helped catalyze donor budget support and close short-term financing gaps in 2020 (see IMF support status), but according to the World Bank, nearly 1.4 million people are expected to have fallen below the poverty line of $1.9/day in 2020, bringing the poverty rate to 77.4 percent, its highest level since 2012. A partial economic rebound is expected in 2021, with real GDP projected at 3.2 percent, while the fiscal stance will remain accommodative with an anticipated domestic primary deficit of 2.5 percent of GDP. The longstanding economic impact of the pandemic is also creating additional balance of payment needs, estimated at about 2.8 percent of GDP in 2021 and 1 percent of GDP per year on average over 2022–24. The government developed a multisectoral emergency plan to address the pandemic. A state of emergency was declared in March (and ended in October), complemented by measures such as the closure of borders, quarantines and systematic testing of all travelers, temporary lockdowns, and a limitation of business operations. A multisectoral emergency plan was developed and included paying for the medical treatment of patients, the ramp-up of existing social safety net measures (such as distribution of food and staple products and cash transfers to the most vulnerable households), and the rescheduling of electricity bill payments. Measures to support the private sector focused on business continuity and job protection, and granting or rescheduling of loans for companies that benefited from the central bank’s exceptional measures to support liquidity. Total spending on health, education and social protection is estimated at about 4.2 percent of GDP in 2020. While it is difficult to identify which part of this spending was specifically dedicated to mitigating the COVID shock, and most of the effective measures were implemented through externally financed projects, the two RCF disbursements and additional budget support from other donors, and the resources freed up by debt service relief were essential to support Madagascar’s efforts to mitigate the impact of the pandemic, including closing the fiscal gap to allow for the continuity of essential public services.

Madagascar: COVID Related Fiscal Measures, 2020–21

(Percent of GDP, unless otherwise indicated)

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January 2020 Article IV projection

Governance safeguards. There has been significant progress on the disclosure of COVID-19 related spending, in line with commitments in the Letter of Intent (LOI) for the request for a second-round RCF disbursement in July 2020 (IMF Country Report No. 20/268). The Ministry of Economy and Finance website provides the list of all the external grants and loans received in 2020 to mitigate the impact of the pandemic, information on spending including details by Ministries, by category of spending, and specific subcategories (e.g., payments for hospitalization, treatment, and care). For spending that relates to procurement contracts, the same website provides information on their purpose, the amount of financial transfers, and the names of awardees (whether individuals or companies). As of February 26, three quarters of the listed contracts also included links to contract documents with the names of either the natural persons to whom contracts were awarded or else those of the authorized representatives or agents signing each contract awarded to a legal person/company. The authorities have also started to publish ex-post delivery reports for the executed contracts, and intend to continue until all the remaining contracts are published. They also reiterated that they will implement the full range of the RCF LOI commitments, including the publication of an independent third-party audit of COVID-19 spending by end-2021 and the publication of the names of the beneficial owners of legal persons/companies awarded pandemic-related procurement contracts.

IMF support status. Two RCF disbursements, each equivalent to 50 percent of quota, were approved on April 3 and July 30 to help the country meet the urgent balance of payment needs stemming from pandemic. Together with disbursements under the 2016–20 ECF, total IMF outstanding credit reached SDR 546.88 million (about 223.8 percent of quota) at end-2020. In response to a request from the Malagasy authorities, discussions were held during January 18–February 12, 2021 to discuss a new medium-term program supported by IMF resources under the ECF, with a proposed access equivalent to 90 percent of quota (about US$320 million).1 The proposed program focuses on rebuilding fiscal space by mobilizing domestic revenue, improving quality of expenditure to increase investment and social spending, mitigating main fiscal risks including from natural disasters and climate change, strengthening governance and reinforcing the anti-corruption framework, and continuing monetary and financial reforms. The authorities’ request for an ECF arrangement could be considered by the IMF Executive Board in end-March 2021.

Upcoming debt service. Madagascar has debt service of SDR 6.110 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff supports the strategy of a multisectoral plan to mitigate the impact of the pandemic, which requires continued and adequate fiscal support. Staff assesses that the resources freed by the 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. It is crucial, however, to increase priority spending in social sectors, as under-execution has continued in 2020 mainly reflecting weaknesses in the planning, execution, monitoring and reporting of this spending. The budget of the four social ministries has been increased by more than 10 percent in the 2021 budget law, and the proposed program will focus on the authorities’ accountability for spending execution and monitoring outcomes.

Table 1.

Madagascar: Selected Economic and Financial Indicators, 2018–26

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

Primary balance excl. foreign-financed investment and grants. Commitment basis.

A negative value indicates a financing gap to be filled by budget support or other financing still to be committed or identified.

Annex XVII. Malawi: Update for CCRT Debt Relief

Recent Economic Developments. Malawi has faced a severe second round of COVID infections exceeding the first wave. The number of positive cases of COVID-19 quadrupled from 6,028 to 25,895 between December 2020 and February 2021, though daily positive cases have started to decline since mid-January. The severity of the second wave is expected to weigh on economic activity in the first half of 2021; growth in 2021 is projected at 2.2 percent, which is a decline from the pre-pandemic projection of 5.5 percent, but an improvement from 2020. Inflation has ended the year at 7.6 percent (the period average at 8.6 percent), but is projected to increase to 9.5 percent in 2021 as fuel and food prices pick up in 2021. Domestic primary deficit is projected to widen to 7.1 percent of GDP in FY20/21 from an outturn of 3.9 percent of GDP in FY2019/20 (Table 1), largely due to an increase in health and social spending (Text Table 1). With sizable interest payments on domestic debt, the overall fiscal balance is projected to reach 12.8 percent by end FY2020/21, putting further pressure on already high total public debt. On the external front, the current account in 2020 has widened to about 20 percent of GDP (compared to pre-pandemic projections of 17 percent of GDP) to remain elevated in 2021. Gross official reserves thus have ended 2020 at US$565 million (equivalent to 2.9 months of imports) as opposed to US$873 million (equivalent to 3.1 months of imports) as projected in October 2020. External financing needs for 2021 have been revised to 4.6 percent of GDP in 2021, about 2 percentage points of GDP higher than staff projection in October 2020.

Policy Response. With the help of development partners, and the Fund, COVID-related health care and social spending reached Kwacha 12.5 billion (0.2 percent of GDP) and Kwacha 36 billion (0.5 percent of GDP) in FY19/20 and FY20/21, respectively (Text Table 1). This financial support helped develop testing capabilities and isolation centers, import medical equipment, hire medical staff, and raise public awareness. The authorities are preparing a National Vaccine Deployment Plan and Community Engagement Strategy to inform plans and costs related to rolling out and administration of the vaccine.1 To support small and medium enterprises (SMEs), commercial banks and micro-finance institutions are providing a moratorium on their debt service until end-June 2021. To support the economy, the Reserve Bank of Malawi reduced the policy rate by 150 basis points to 12 percent. The domestic currency Liquidity Reserve Requirement (LRR) has also been reduced by 125 basis points to 3.75 percent (aligned with the foreign currency LRR).

Malawi: COVID Related Fiscal Measures, 2020–21

(Percent of GDP, unless otherwise indicated)

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Sources: Malawian authorities; and IMF estimates and projections.

Pre-COVID projections refer to November 2019.

Governance safeguards. To ensure an effective and transparent use of financing related to COVID19, the authorities are publishing procurement documentation (https://www.ppda.mw/covid-19-reports/)—tenders, bids, and names of awarded companies and legal arrangements, products or services procured and their costs, beneficial owners, and ex-post validation of delivery on contract-by-contract basis; publishing quarterly statements on commitments and payments of COVID-19 related activities; and specifying COVID-19 related costs in published monthly salary report, budget funding, and cash management analysis. The National Audit Office will submit quarterly audits of COVID-19 related spending to the Minister of Finance and, once the pandemic abates, will publish and submit to Parliament a comprehensive audit of COVID-19-related spending.

IMF support status. A three-year ECF arrangement was approved in April 2018. Following Tropical Cyclone Idai, access was augmented from 56.25 to 76.25 percent of quota at the time of the 2nd and 3rd reviews in November 2019. In response to the pandemic, on May 1, 2020 the request for a disbursement of 47.9 percent of quota under the Rapid Credit Facility (RCF, no budget support) was approved. The new administration came into office in June 2020 and cancelled the 2018 ECF arrangement in September. A second disbursement under the RCF of 52.1 percent of quota (30 percent of which was budget support) was approved by the Board on October 2, 2020. The authorities have expressed interest in a successor ECF-supported program to align with their long-term development strategy (Malawi Vision 2063) which was launched in January 2021.

Upcoming CCRT-eligible debt service. Malawi has debt service of SDR 7.809 million (5.626 percent of Malawi’s quota) falling due to the Fund during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Malawi is implementing appropriate measures to provide emergency health, social and economic support to minimize the impact of the global pandemic. Staff sees a need for a follow-up UCT-quality program that not only addresses the immediate impact of the global pandemic, but also supports the authorities’ long-term development strategy with a set of well-targeted reform agenda. Staff assesses that ongoing efforts to enhance transparency and accountability of spending help ensure efficient use of resources freed by debt service relief under the CCRT.

Table 1.

Malawi: Selected Economic Indicators, 2019–26

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Sources: Malawian authorities; IMF staff estimates and projections; and UN Human Development Index.

The fiscal year starts in July and ends in June. The current financial year, 2020, runs from July 1, 2019 to June 30, 2020.

Please note that government fiscal statistics are reported following the Government Finance Statistics Manual (2014) starting 2020 projections and going forward.

Domestic primary balance is calculated by subtracting current expenditures (except interest payment) and domestically-financed development expenditures from tax and non-tax revenues.

Annex XVIII. Mali: Update for CCRT Debt Relief

Recent Economic Developments. COVID-19 continues to have a significant economic impact on Mali, exacerbating the effects of the socio-political and security crises. After a relatively mild first wave during spring-summer 2020, the spread of infections accelerated in fall-winter of 2020–21 with the onset of a second, much stronger, wave. Daily infections peaked at over 100 at end-2020 (based on a 7-day moving average), with the total number of registered cases reaching 8,332 as of February 25, 2021, of which 348 deaths. Local outbreak of the pandemic, the early containment measures, and the contraction in external demand caused a slowdown in construction, accommodation services, and transportation. These—along with the temporary sanctions by the Economic Community of West African States following the August 2020 coup d’état and a poor performance in agriculture—are estimated to have contracted economic activity by around 2 percent in 2020, in line with the projections during the CCRT2 update, down from an average 5 percent during the past six years. Barring a significant deterioration in the dynamics of the pandemic, economic growth is expected to pick up to 4 percent in 2021 and to its potential of 5 percent thereafter, but the negative output gap will close only gradually over medium term. The downturn in economic activity is expected to increase extreme poverty incidence in Mali from 42 percent of the population (8.2 million people) in 2019, according to World Bank estimates, to over 45 percent in 2020–21. The effects of the pandemic and the needed policy response have also weakened fiscal outcomes, through a decline in revenues and expenditure measures to combat the pandemic. Fiscal deficits are expected to widen to around 5½ percent of GDP in 2020–21 (compared to 6.2 percent of GDP in 2020 and 4.5 percent of GDP in 2021 at the time of the previous update) and, in light of the weak economic cycle, to return to the WAMEU ceiling of 3 percent of GDP only gradually by 2024. Public health and macroeconomic policies. As the second wave of infections picked up at end-2020, the authorities have reinforced containment and preventive measures, including testing and controls in public places, teleworking requirements in large companies and closure of educational institutions – these were relaxed as the second wave became more contained. The authorities also prepared a national vaccination plan prioritizing medical workers, the elderly and those with underlying health conditions. This first wave of vaccinations, under the umbrella of the COVAX initiative, is expected to start in April 2021 and to reach some 20 percent of the population or 40 percent of those above age 15, with a subsequent rollout to the rest of the population as more vaccines become available. The policy measures to contain the social and economic fallout from the pandemic have been steadily implemented. In addition to the monetary and financial measures taken by the regional central bank (BCEAO) in March 2020, a package of supportive fiscal measures to vulnerable households and firms was announced by the authorities in April 2020, totaling about 2 percent of GDP in spending measures (text table). Preliminary estimates indicate that 95 percent of this stimulus had been implemented by end-2020, although household income support is expected to reach households only in 2021 due to delays in identifying potential beneficiaries under still narrow social safety nets. Further spending allocations to combat COVID-19 have been budgeted for 2021, albeit at a lower scale.

Mali: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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IMF Country Report No. 20/8, Mali : First Review Under the ECF, January 8, 2020.

Percent of public spending.

Governance safeguards. In the context of the IMF support under the Rapid Credit Facility, the authorities committed to the transparent use of the funds for the pandemic response through the publication of information on COVID-19 spending, the commissioning and publication of an independent audit of this spending, and publication of information on large procurement projects, including beneficial ownership. With a view towards meeting these commitments, the authorities started the monthly publication of the COVID-19 expenditure reports in October 2020, have commissioned an independent audit of COVID-19 related expenditure by the Office of the Auditor General (BVG), to be published by end-July 2021, and have requested technical assistance from the Fund to assist them in implementing the commitment relating to the collection and publication of beneficial ownership information. The documentation on large public procurement contracts, including the beneficial ownership information of awarded entities, is expected to be published by end-May 2021.

IMF support status. Following the onset of the pandemic, the IMF supported Mali’s policy response and its economic policies through (i) COVID-19 emergency support under the Rapid Credit Facility (around US$200 million, 1.2 percent of GDP), approved on April 30, 2020, (ii) the first and second tranche of debt service relief under the Catastrophe Containment Relief Trust (both around US$10 million, 0.06 percent of GDP) approved on April 13 and October 30, 2020, respectively, and (iii) second and third reviews under the Extended Credit Facility (around US$57 million, 0.3 percent of GDP) that were temporarily delayed by the pandemic and the August 2020 coup d’état and approved by the Executive Board on February 22, 2021.1

Upcoming CCRT eligible debt service. Mali has debt service of SDR 7.7 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Mali is pursuing appropriate macroeconomic policies to address the pandemic amid elevated uncertainty surrounding its dynamics and the unfolding political transition. Staff assesses that the resources freed by the first and second tranches 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 mitigate the impact of the pandemic on the population.

Mali: Selected Economic and Financial Indicators, 2017–25

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Sources: Ministry of Economy and Finance; and IMF staff estimates and projections.

IMF Country Report No. 20/8, Mali: First Review Under the Extended Credit Facility Arrangement. The review was completed on January 8, 2020.

Includes BCEAO statutory advances, government bonds, treasury bills, and other debts.

For 2020, the latest available data is for November.

Annex XIX. Republic of Mozambique: Update for CCRT Debt Relief

Recent economic developments. COVID-19 continues to have a severe economic impact on Mozambique. GDP contracted by 1.3 percent in 2020 (versus a pre-COVID projection of 6 percent), the first recession since 1992, and is expected to hit the most vulnerable households disproportionally and negatively impact recent progress in poverty reduction. Although Mozambique was relatively less affected by the pandemic in 2020 based on reported data (ending the year with an infection rate of about 550 per million inhabitants, and about 5 deaths per million), the infection rate has jumped in recent weeks, with total cases and fatalities tripling in the first two months of 2021.1 Lockdown measures and weak external demand weighed on activity despite the support of a good agricultural harvest. With the infection rate increasing again in the first two months of 2021, cyclone Eloise striking the central regions of the country and an insurgency in a northern province that has displaced more than 500,000 people, real GDP growth is projected to only partially rebound this year, to 2.1 percent (versus a pre-COVID projection of 4 percent). Inflation remained subdued in 2020 (3.1 percent e.o.p.) but is expected to increase in 2021 due to currency depreciation (close to 15 percent against the dollar since March 2020) and border closures with South Africa periodically restricti ng supply of consumer goods. The primary deficit after grants is estimated to have widened to 2.3 percent of GDP in 2020 due to lower revenue and crisis spending, and the current account deficit to have widened by 40 percentage points of GDP to 60.6 percent of GDP owing mainly to a decline in commodities export receipts of 8.2 percentage points of GDP2. Public debt is now expected to peak in 2022 at about 125 percent of GDP. The external financing need reached 3.7 percent of GDP in 2020 and is projected to amount to about 3.4 percent in 2021. Downside risks to these projections are significant.

Public health and macroeconomic policy response. The authorities have been implementing measures to limit the economic impact of the pandemic, preserve macroeconomic stability and support the most vulnerable, although data limitations constrain a full assessment. The CCRT debt relief was allocated to the ministry of health. Health, education, and social spending have been increased (by about 1.1 percent of GDP in 2020), and the 2020 revised budget has allowed for higher COVID-related spending to support businesses and vulnerable households (for about 1 percent of GDP). In 2020, the authorities received about US$ 515 million (3.6 percent of GDP) in grants and concessional financing from development partners. After reducing the policy rate between April and December 2020 by 250 basis points, the central bank reversed course in January, increasing the policy rate by 300 basis points in response to rising inflation pressures.

Mozambique: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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The assessment is constrained by data limitation.

Most recent projection before March 1, 2020.

Governance safeguards. The authorities are committed to reforms to strengthen governance, transparency and accountability in line with recommendations of the Governme nt’s Diagnostic Report on Transparency, Governance and Corruption published in August 2019. With respect to crisis mitigation measures, the government has taken steps to implement commitments from the Letter of Intent of the Rapid Credit Facility (approved in April 2020). These commitments included publishing an independent audit of spending and procurement processes once the crisis abates (it is not yet underway), which will be undertaken by the supreme audit institution (the Tribunal Administrativo). The government is publishing regular reports on funds received and their allocation on the Ministry of Finance website, while the Health Ministry has published information on large public procurement contracts in the health sector on their website. Publication of the beneficial owners of the companies awarded contracts, and ex-post validation of delivery have not started yet. The authorities submitted a revised budget to parliament in September 2020 to fully account for COVID measures and financi ng and have opened earmarked accounts at the central bank for spending on health and support to households.

IMF program status. The IMF Executive Board approved a US$309 million disbursement (100 percent of quota) under the Rapid Credit Facility to address the pandemic on April 24, 2020. The authorities have requested an ECF, and technical discussions started in February.

Upcoming debt service. Mozambique has debt service of SDR 9.5 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff appraisal. Staff assesses that Mozambique is pursuing appropriate macroeconomic policies to address the global pandemic. Staff also assesses that the resources freed by the first and second tranches 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 lives and livelihoods of the population.

Table 1.

Mozambique: Selected Economic and Financial Indicators, 2017–2026

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

Net of verified VAT refund requests.

Modified cash balances and including arrears.

Liquidity injection standing lending facility rate (2016), Bank of Mozambique’s MIMO rate (2017, and latest as of August 2020).

4 Pre-Covid projections for 2020 corresponds to October WEO 2019.

UN Human Development Index data for 2020 are not yet available.

Annex XX. Nepal: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic continues to severely impact Nepal’s economy. Remittances have been volatile, tourism collapsed, and domestic activities weakened. For Nepal, it is assumed that the pandemic will still be prevalent in calendar year 2021 and a vaccine would be widely available in the second half of 2022, albeit this is subject to much uncertainty. In this context, real GDP growth is estimated at -1.9 percent in FY2019/20 (FY ends in mid-July) and 2.9 percent in FY2020/21 (compared to 6 and 5.7 percent respectively in the pre-pandemic baseline). Losses of jobs and income may likely be a setback to the important social development gains of the past decade. Revenue shortfalls and rise in expenditure needs (including for health, social assistance, economic support measures) will lead to an increase of the overall fiscal deficit from 5.6 percent of GDP in FY2019/20 to 9.2 percent of GDP and debt of 54.2 percent of GDP in FY2020/21 (compared to fiscal deficits of 4.5 and 4.4 percent of GDP respectively in the pre-pandemic baseline). While the current account deficit narrowed to 1 percent of GDP in FY2019/20 due to a sharp collapse in imports, in FY2020/21 it is expected to widen to 6.5 percent of GDP as restrictions are lifted and economic activity picks up. Further, growth underperformance in migrant-hosting countries, return migration, and fewer new workers going abroad suggest remittances will be subdued. In FY2020/21, the fiscal financing gap (estimated at 1¾ percent of GDP) and balance of payments gap (estimated at 5¼ percent of GDP) are expected to be financed with budget support from development partners and reserve drawdowns. Nepal needs to preserve foreign reserves to protect credibility of the peg, prepare in case remittances weaken further, and maintain buffers in case other risks materialize (including natural disasters).

Public health and macroeconomic policy response. Fiscal measures implemented include: (i) higher health spending for additional insurance for front-line medical personnel; eliminating import duties on medical supplies; and setting up testing facilities, quarantine centers and temporary hospitals; (ii) tax relief to households and businesses; and (iii) expansion of social assistance, including subsidies for utility bills, in-kind food transfers, and wage support for informal sector workers (including through expansion of the public works program). As staff did not project expenditures by functional classification before COVID-19, these cannot be compared to actual outturns of priority expenditures to assess the impact of COVID related fiscal measures. However, in FY2019/20, priority expenditure (including health, education, and social assistance) increased by 0.8 percent of GDP compared to FY2018/19, notwithstanding perennial budget under execution in Nepal in part due to capacity constraints that have been further exacerbated by the pandemic. Priority spending in FY2020/21 is expected to increase by 1.5 percent of GDP compared to FY2019/20. To support the continued supply of credit, the Nepal Rastra Bank has taken measures to ensure adequate liquidity in the financial system and support credit, including by cutting the policy interest rate and cash reserve ratio, and easing macroprudential measures. The authorities also enhanced the refinance facility and the concessional loan program to affected businesses.

Nepal: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Governance safeguards. The Government of Nepal continues to implement spending transparency commitments based on existing frameworks and practices notwithstanding the ongoing impact of Covid-19, which affected government operations and exacerbated capacity constraints. Regarding the transparency commitments in the context of the Rapid Credit Facility (RCF), spending from the Covid-19 Fund—an extra-budgetary fund with financing from government, development partners, and the private sector—is being published monthly. The Office of the Auditor General (OAG), an independent Constitutional body, is expected to audit Covid-19 related expenditure as part of its mandated annual audit of government accounts and publish the results on the OAG website. The OAG is also expected to audit the Covid-19 Fund. The authorities are expected to take further steps to fully meet the RCF transparency commitments, including publication of budget expenditures related to Covid-19 and publication of beneficial ownership information for new, large, Covid-19 related procurement contracts.

IMF support status. On May 6, 2020, the IMF Executive Board approved a 100 percent of quota (US$214 million) disbursement under the Rapid Credit Facility to support Nepal’s Covid-19 related response efforts. Staff is currently engaging closely with the authorities to design a new IMF program supported by the Extended Credit Facility (ECF) for 180 percent of quota (USD 403 million). The proposed ECF arrangement would help mitigate the COVID-19 impact on health and economic activity and protect vulnerable groups; preserve macroeconomic and financial stability; and implement reforms to support sustained growth and poverty reduction.

Upcoming debt service. Nepal has debt service to the IMF of SDR 3.57 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff supports the authorities’ priorities to mitigate the impact of the pandemic and preserve macroeconomic stability. Efforts are appropriately focused on increasing health spending, strengthening social assistance, ensuring adequate liquidity to the banking system, and supporting access to credit. Further measures may be needed if downside risks materialize. Ongoing efforts to enhance transparency and accountability of COVID-19 related spending provide assurances that the resources freed by the first and second tranches of Fund debt service relief under the CCRT, and other support from the Fund, are being used to provide health, social and economic support to the economy to mitigate the impact of the pandemic on life and livelihood of the population.

Table 1.

Nepal: Selected Economic Indicators, 2017/18–2025/26 1/

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Sources: Nepali authorities; and IMF staff estimates and projections. Note: 2020 Article IV Baseline is based on data as of end-Jan 2020, and current baseline forecast is as of Jan 21, 2021.

Fiscal year ends mid-July.

Net incurrence of foreign liabilities cover previously identified financing and new financing (identified as of October) to support Nepal’s COVID-response. The new financing include the IMF prospective ECF (US$398.8 million for FY2020/21-FY2023/24), World Bank (US$500 million for FY2020/21-FY2022/23), Asian Development Bank (US$200 million for FY2020/21-FY2023/24), and DSSI (US$49.5 million for FY2020/21).

The UN Human Development Index is a composite index measuring average achievement in three basic dimensions of human development—a long and healthy life, knowledge and a decent standard of living.

CCRT debt relief is included in grants and net incurrence of liabilities (foreign). The first tranche of CCRT debt relief covering the period April 14, 2020 to October 13, 2020 for SDR 2.9 million in FY 2019/20 was approved on April 13, 2020. The second tranche of CCRT debt relief covering the period October 14, 2020 to April 13, 2021 for SDR 3.6 million was approved on October 2, 2020. The grant for debt service falling due in the 12 months from April 14, 2021 is subject to the availability of resources under the CCRT.

Annex XXI. Niger: Update for CCRT Debt Relief

Recent economic developments.1 The updated outlook for the Nigerien economy is close to the projections of October 2020. Real GDP growth for 2020 is estimated to be somewhat higher at 1.2 percent, while activity this year is projected to increase by 6.9 percent, driven by the removal of containment measures, the acceleration of the implementation of large-scale projects, and the reopening of the border with Nigeria. This compares to pre-pandemic projections of 6.0 percent for 2020 and 5.6 percent for 2021. Niger’s limited exposure to international value chains and a large informal agricultural sector afford a degree of protection. The Covid-19 crisis adds to numerous pressing challenges—including the security crisis across the Sahel, climate change and the recent massive floods—thus worsening the incidence of poverty in the country with one of the lowest HDI in the world. Budgetary savings in non-priority areas and stepped-up budget support notwithstanding, the fiscal deficit is set to widen in 2020 and 2021 from pre-pandemic projections of 2.7 and 1.9 percent of GDP, respectively, to 5.8 and 4.4 percent of GDP. This reflects revenue shortfalls related to the economic slowdown and difficulties in collecting taxes under pandemic conditions. The current account deficit is estimated at 13.3 percent of GDP in 2020 and projected at 16.7 percent in 2021, below pre-pandemic projections, due to lower imports stemming from delays in large-scale projects. However, external financing needs will remain high in the short-to-medium term, reflecting the difficult fiscal situation.

Public health and macroeconomic policy response. Most containment and restriction measures adopted early after the outbreak of the pandemic in the context of the declaration of the state of emergency were gradually lifted from mid-May to August 2020. Only the closure of land borders to travel and the obligation to wear masks in public remain in place. With the resurgence of new cases, the authorities have decided on January 5, 2021 to extend the state of emergency for a further period of three months from January 08, 2021 and renewed the measure to close entertainment venues. The Government devised a comprehensive response plan to tackle the health, social, and economic aspects of the COVID-19 pandemic. Preliminary data covering the first three quarters of the year show that priority expenditures in 2020 amounted to 7.9 percent of GDP, slightly below the pre-covid-19 projection of 8.2, mainly due to lower than expected health expenditures—reaching 1.3 percent of GDP against a projection of 1.7 percent.2 However, these figures are expected to be revised upwards when the outturn for the last quarter becomes available, as a large share of expenditures — notably about half of foreign-financed investment — is made during this quarter, and typically over 33 percent of health expenditure comes from foreign-financed investment. Priority expenditures are currently forecast at 7.9 percent of GDP in 2021. Spending on other Covid-related items in 2020 is estimated at 0.5 percent of GDP. A credit promotion scheme worth 1.9 percent of GDP, backstopped by government guarantees, remains without significant fiscal costs. Tax policy measures have been limited, but a large revenue shortfall for 2020 and projected in 2021, reflects the economic repercussions of the pandemic.

Niger: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Available spending data only covers the first three quarter of 2020.

Governance safeguards. COVID-19 related spending is channeled through the budget and as such subject to the usual safeguards for budgetary spending, including auditing by the Court of Audit which is expected to be completed by the end of this year for the 2020 budget law. There are no significant extra-budgetary funds. The government is publishing data on larger contracts3 (over 0.5 billion CFA) and has published on an official website4 the asset declarations of all members of government. The government has centralized the costing and monitoring of crisis measures at the Ministry of Finance and issued a supplementary budget in line with commitments made by the authorities under the RCF. Niger has made progress in recent years with strengthening its governance framework more generally, including the establishment and strengthening of the anti-corruption agency, Haute Autorité de Lutte contre la Corruption et les Infractions Assimilées (HALCIA). A judicial process is currently investigating alleged procurement irregularities at the Ministry of Defense, and the government has committed to undertake all necessary measures to review and strengthen procurement procedures once the process is complete.

IMF support status. An ECF arrangement (SDR118.44 million or 90 percent of quota) was completed in October 2020. Emergency financial assistances under the Rapid Credit Facility (SDR83.66 million, 63.6 percent of quota) was approved on April 14, 2020. Staff are expecting to engage closely with the authorities on further support, including a possible successor ECF program, following the second round of Presidential elections in late February 2021.

Upcoming debt service. Niger has debt service of SDR 9.54 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff appraisal. Staff assess that Niger is pursuing appropriate macroeconomic policies to address the global pandemic. Staff also assess that the resources freed by the first two initial tranches 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.

Niger: Selected Economic and Financial Indicators, 2018–26

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

Completed in January 2020. Most recent pre-COVID-19 projections.

Revenue excluding grants minus expenditure excluding foreign-financed capital expenditure.

Revenue including grants minus expenditure; WAEMU anchor.

Includes from 2017 onward, debt associated with commercial PPPs.

In percent of GDP as revised in the context of the migration to SNA2008.

Annex XXII. Rwanda: Update for CCRT Debt Relief

Recent Economic Developments. COVID-19 continues to have a severe impact on Rwanda. While there was significant progress in containing the spread of the virus in 2020 H2, output in 2020 Q3 contracted by 3.6 percent y/y driven mainly by the continued deterioration in the services sector battered by containment measures. As a result, output in 2020, which was expected to contract by 0.2 percent at the time of the 3rd PCI review in December 2020 from a pre-pandemic projected expansion of 8 percent, is now estimated to have contracted further by 3.4 percent. Headline inflation declined steadily in H2 2020, reaching 2.8 percent y/y in January 2021 due to weak domestic and foreign demand and the normalization of transport fares. Since the second CCRT disbursement in October 2020 (CCRT-2), the pandemic has weakened the macroeconomic outlook further. The reinstitution of containment measures and a new lockdown in the capital Kigali in 2021 Q1, following a surge in infections and a slow vaccine rollout risk delaying the recovery this year, with annual economic growth revised downwards to 5.4 percent against 5.7 percent at the time of the 3rd PCI review. The social impact of the pandemic is expected to be significant, with available estimates suggesting that up to ½ million people could fall into poverty in the absence of any intervention and virtually the entire student population of 3.5 million out of school for most of 2020.1 Fiscal and external financing gaps have been closed since CCRT-2 following the IMF’s two RCF disbursements, concessional resources from development partners, and higher-than-anticipated remittances. Fiscal and external balances are projected to deteriorate through 2021 relative to their pre-pandemic projections, reflecting mainly additional COVID-19-related spending, higher oil prices, and a decline in exports. These imbalances are expected to be gradually reduced, as the economy recovers.

Public Health and Macroeconomic Response. The continued strong public health response since CCRT-2 is helping to contain the spread of the virus and maintain fatality rates significantly below other sub-Saharan Africa countries. Good public health preparedness, the systematic adoption and enforcement of stringent social distancing measures, and efforts to hike testing capacity led to a gradual reopening through the last quarter of 2020. A new lockdown in the capital Kigali was adopted in January following a spike in in infections and deaths. The vaccination campaign started in February with doses to cover about 4 percent of the population already secured. Discussions are ongoing with COVAX, the AU, and bilateral suppliers to secure additional doses to vaccinate 20 percent of the population by end-2021 and 60 percent by end-2022. The government has significantly scaled up its economic response to the pandemic articulated in the Economic Recovery Plan (ERP) adopted in May 2020. Initially costed at 3.3 percent of GDP and spanning two fiscal years, the ERP now amounts to 7.7 percent of GDP and was extended to two additional fiscal years to reflect the expected larger and protracted impact of the pandemic. About 1/6 of this amount (1.2 percent of GDP) was spent in FY19/20 (ending in June 2020). More than 2/3 (5 ½ percent of GDP) will be spent by the end of the current FY 20/21 budget in measures to (i) prevent, contain, and manage the pandemic (2.1 percent of GDP); (ii) support vulnerable households through cash transfers, subsidized access to agricultural inputs, and public works (1.9 percent of GDP); and (iii) assist firms in hardest-hit sectors through the provision of subsidized loans, direct support, and credit guarantees channeled through the Economic Recovery Fund (1.2 percent of GDP). Tax deferral and relief measures benefitting households and corporates have also been adopted.

Rwanda: COVID-Related Fiscal Measures

(Central government, percent of GDP, unless otherwise indicated)

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Source: Rwandan authorities and IMF staff estimates and projections.

First PCI Review projections (December 2019)

3rd PCI review projections (December 2020)

Revised Budget (February 2021) since actuals only available in August 2021

Sum of recurrent/domestically-financed/policy lending expenditures identified as priority under the government’s develoment plan (NST).

Breakdown by functional categories such as health, education, and social protection unavialbe due to cross-funcional nature of NST pillars.

Total COVID-related spending

Estimated amount for FY 19/20 was neglible at less than 0.02 percent of GDP and not available for other fiscal years.

Governance Safeguards. A financing item “COVID-19 response” was created under the chart of accounts for tracking crisis-related spending. A separate bank account under the treasury single account system was also set up to receive all contributions to the Economic Recovery Fund to support businesses. Information on awarded government contracts is publicly available from the government’s e-procurement website.2 All expenditures, including pandemic-related will be audited and published by May 2021.

IMF program status. Rwanda has a PCI supported program in place since June 2019. The first review was completed in January 2020. An interim performance update was issued to the Executive Board in September, as the second review could not be completed within the three-month period of the scheduled review date (June 15, 2020), given the large uncertainty around the near-term outlook and required policies at that time and the need to prioritize the authorities’ RCF requests. The third review was completed in December 2020. The fourth review is expected to be completed before end-June 2021. Two RCF disbursements under the “exogenous shock window” totaling SDR 160.2 million (100 percent of the quota) were approved on April 2nd and June 11th, 2020 respectively, to mitigate the economic impact of the COVID-19 pandemic.

Upcoming debt service. Rwanda has debt service of SDR 14.02 million to the Fund falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Rwanda is pursuing appropriate macroeconomic policies to address the pandemic. Staff also assesses that the resources freed by the first and second tranches of Fund debt service relief under the CCRT, and RCF disbursements are being properly used to help provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on lives and livelihoods of the population.3

Table 1.

Rwanda: Selected Economic Indicators, 2019–261

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Sources: Rwandan authorities and IMF staff estimates.

Pre-pandemic projections done at the time of the 1st PCI review (December 2019).

Overall deficit excl. spending on materialized contigent liabilties and other items already incl. in the DSA.

Annex XXIII. Democratic Republic of São Tomé and Príncipe: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic is having a severe impact on São Tomé and Príncipe’s economy, with real GDP growth projected at -6.5 percent in 2020 (compared with a pre-pandemic growth of positive 3.5 percent), and 3 percent in 2021, exacerbating fiscal and external imbalances. Growth in 2021 is driven by a rebound of tourism and construction activities, and a gradual recovery in sectors affected by the pandemic, including transportation and trade services. A tax policy package (permanent tax measures) implemented in 2019 contributed to a revenue windfall of about 1½ percent of GDP in 2020. This strong revenue performance is expected to carry through to 2021. What’s more, the authorities are committed to implementing VAT in the second half of 2021, which would further boost revenue. With a sharp decline in budget grants and increased pandemic-related expenditures, the 2021 overall fiscal balance would widen by about 5½ percent of GDP (compared with the 2020 outturn), and the government’s gross financing needs would reach 6 percent of GDP. While the current account deficit deteriorated in 2020, it is projected to improve by 2.5 percentage points to 14.9 percent of GDP in 2021 due in part to a pick-up in exports and tourism receipts. With exceptionally large external support to finance government operations, the authorities have begun to contain excess liquidity to adequately support the peg. Strong implementation of the policies and reforms supported by the ECF arrangement will be important to support the exchange rate peg going forward. Poverty in the country remains high, with roughly two-thirds of the population living below the poverty line. The IMF Board completed the second review of the ECF arrangement on February 26, 2021.1

Public health and macroeconomic policy response. Priority expenditure as a share of GDP stood at 8.4 percent in 2020. These expenditures (mainly on education and health), together with other COVID-related spending (1.1 percent of GDP), were financed by unprecedented external financial support, including resources freed under the tranches of Fund debt service relief under the CCRT, the RCF, and the ECF arrangement. The decline in priority spending in 2020, compared with the budget, reflects the adverse impact of the pandemic on the implementation of externally financed projects.2 In 2021, the authorities are seeking external financing to more adequately address COVID-19 emergency and rising social needs, in particular the rollout of their vaccination program and the construction of new schools and hiring of new teachers to ensure better social distancing in schools.

Governance safeguards. As part of the ECF arrangement, the authorities have begun publishing public procurement contracts and monthly COVID-19-related expenditure reports on the Ministry of Finance website. They are working with the World Bank to develop a webpage for the procurement agency COSSIL, which will expedite the publication of procurement documents and facilitate management and transparency over public contracts. The authorities will conduct an ex-post validation of the delivery of the contracts within two weeks of documents becoming available to the procurement agency COSSIL and an independent audit of spending by October 2021, and will publish the results to confirm that funds were used for their intended purpose. They have also committed to overcoming current constraints in collecting and publishing information on beneficial ownership of firms awarded public contracts and have requested LEG TA in support of this measure.

IMF program status. A 40-month ECF arrangement was approved on October 2, 2019 in the amount of SDR 13.32 million (90 percent of quota). An RCF disbursement (61 percent of quota) was approved in April 2020, and the Board approved the first review of the ECF arrangement and an augmentation (10 percent of quota) in July 2020. The Board approved the second review of the ECF arrangement on February 26, 2021.

Upcoming CCRT-eligible debt service. The Democratic Republic of São Tomé and Príncipe has debt service of SDR 174,428 falling due from April 14, 2021 to October 15, 2021, the period covered by the third tranche of debt service relief under the CCRT.

Staff appraisal. Staff assesses that the authorities are pursuing appropriate macroeconomic policies to address the immediate impacts of the pandemic while maintaining their commitment to medium-term structural reforms under the ECF arrangement. The resources freed under the tranches of Fund debt service relief under the CCRT, the RCF, and the ECF arrangement are contributing to finance additional health services, protect the most vulnerable, and support the economy in the short-term.

São Tomé and Príncipe: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Table 1.

São Tomé and Príncipe: Selected Economic Indicators, 2019–22

(Annual change in percent, unless otherwise indicated)

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Sources: São Tomé and Príncipe authorities’ data and IMF staff estimates and projections.

Central Bank (BCSTP) mid-point rate.

Excludes oil related revenues, grants, interest earned, scheduled interest payments, and foreign-financed capital outlay.

Total public and publicly guaranteed debt as defined in DSA, which includes EMAE’s arrears to ENCO (and excludes the government’s arrears to EMAE due to consolidation). The 5th review had “...” because this concept was not used then.

Percent of exports of goods and nonfactor services.

Gross international reserves exclude the National Oil Account and commercial banks’ foreign currency deposits at the BCSTP in order to meet reserve requirements, for new licensing, and for meeting capital requirements.

Imports of goods and nonfactor services, excluding imports of investment goods and technical assistance.

Annex XXIV. Sierra Leone: Update for CCRT Debt Relief

Recent Economic Developments. Real GDP growth is estimated to have declined by 2.2 percent in 2020 (compared to 4.2 percent growth projected pre-COVID-19), with the services sector most impacted due to stringent containment measures in place through July. While exports weakened significantly, subdued imports and additional financing from development partners helped cushion the external sector impact and fill the balance of payments (BOP) gap that had emerged. The overall fiscal balance widened to an estimated -5.5 percent of non-iron ore GDP, against -3.3 percent projected pre-pandemic, on the back of falling revenues and increased emergency spending. Sierra Leone’s public debt—already assessed at high risk of debt distress before the pandemic—increased to 72 percent of GDP in 2020 (rather than falling to 66.6 percent as expected). A moderate recovery to GDP growth of 3 percent is projected for 2021 (vs. 4.6 percent pre-pandemic), led by the mining sector. A BOP financing gap of about 2 percent of GDP is projected to emerge, as foreign grants and imports return to more normal levels. The outlook is subject to considerable downside risks, including a slower recovery if additional containment measures are needed in response to further waves of COVID-19 infections, particularly if there are delays in vaccine rollout. The projected overall fiscal balance for 2021 of -4.2 percent of non-iron ore GDP (against -3.4 percent pre-pandemic) is also subject to these downside risks, as is the public debt ratio, which is expected to decrease marginally to 71.3 percent of GDP. Pre-pandemic, the multidimensional poverty rate was high, at 57.9 percent, with an additional 19.6 percent classified as vulnerable to multidimensional poverty. Recent surveys suggest an increase in food insecurity and poverty since the pandemic, although the situation appears to have improved since mid-2020 and as containment measures have eased.

Spending on the overall emergency response in 2020 was broadly in line with expectations, while the 2021 budget prioritizes COVID-related spending within a tight financing envelope. The supplementary budget approved in July 2020 allocated 3.3 percent of GDP to COVID-related spending, on health, containment, and economic and social support under the Quick Action Economic Response Plan (QAERP). Preliminary fiscal estimates for 2020 suggest that public health spending (health supplies, additional health care workers, quarantine expenditures, and public awareness program) was slightly higher-than-budgeted, at 2.5 percent of GDP, including due to upticks in case numbers towards the end of the year. Cash transfers (0.1 percent of GDP) were targeted at workers in sectors vulnerable to the pandemic, while new household beneficiaries were added to the social safety net in late 2020/early 2021, supported by the World Bank and European Union. Other COVID-related spending—including on containment, support to farmers, and labor-intensive public works projects—was around 2.7 percent of GDP. The 2021 budget is set to deliver a contraction of the domestic primary balance of some 2½ percent of GDP relative to the current estimation for 2020, as the lingering impact of COVID-19 has slowed the recovery of revenue mobilization, and reduced external budget support necessitated a substantial adjustment. The authorities have prioritized spending on health (1.4 percent of GDP), food security, and labor-intensive public works (both included in transfers to households; 1.0 percent of GDP), in line with their QAERP/COVID response priorities, with a lower allocation for COVID-19 prevention and containment (0.2 percent of GDP), and no dedicated allocation for a vaccine rollout. A microcredit scheme to support small businesses, previously planned for 2020, was recently launched.

Sierra Leone: COVID-Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

2020 outturn for Sierra Leone is an estimate.

Includes customs duties and tax deferrals to beneficiary importers, as well as tax deferrals to the hospitality, travel, aviation, and other sectors.

Governance safeguards. The authorities set up the National COVID-19 Emergency Response Center (NaCOVERC) early in the pandemic and subsequently put in place sound processes to deliver and track spending on health and containment measures. In parallel, the Audit Service Sierra Leone (ASSL) completed a real time audit of NaCOVERC’s activities and submitted its report to Parliament in January 2021. The ASSL plans to complete an ex post audit of NaCOVERC and the COVID-19 response, and publish its report, within 12 months of the end of the fiscal year. The authorities have published the unaudited financial reports for NaCOVERC’s operations through end-December 2020, as well as publishing certain details of all large procurement contacts through end-December 2020 on the website of the National Public Procurement Authority. Following encouragement from IMF staff to transparently report COVID-related spending outside of NaCOVERC, the authorities’ 2020Q3 budget outturn—published on the Ministry of Finance’s website—also includes an overview table, detailing budget spending related to containment, health and the socioeconomic COVID response.

IMF support status. Sierra Leone’s current program supported by a 43-month Extended Credit Facility (ECF) arrangement for SDR 124.44 million (60 percent of quota) was approved in November 2018. The second review under the ECF was completed in early April 2020. ECF reviews have been delayed due to the pandemic but are expected to resume in the second quarter of 2021. A Rapid Credit Facility disbursement of SDR 103.7 million (50 percent of quota) was approved on June 3, 2020. A second disbursement under the RCF of SDR 35.26 million (17 percent of quota) was approved on March 15, 2021.

Upcoming debt service. Sierra Leone has debt service to the Fund of SDR 15.11 million falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Sierra Leone is pursuing appropriate macroeconomic policies to address the global pandemic. There was a significant scaling up of health and social expenditure in 2020, which was made possible in part through Fund debt service relief under the CCRT. Further debt relief under the CCRT in 2021 will allow the government to continue to respond to the COVID-19 pandemic, despite the persistent disruption to revenues. While implementing the appropriate governance arrangements has been challenging, the government has made notable progress towards fulfilling the governance commitments made under the first RCF. Fund emergency support under the RCF (on-lent to the budget) has also played a vital role in funding Sierra Leone’s emergency response.

Table 1.

Sierra Leone. Selected Economic Indicators

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Sources: Sierra Leonean authorities; and Fund staff estimates and projections.

Revenue less expenditures and net lending adjusted for interest payments, foreign financed capital spending, and arrears paydown.

Annex XXV. Solomon Islands: Update for CCRT Debt Relief

Recent economic developments. The global COVID-19 pandemic continues to have a severe economic impact on Solomon Islands. Real GDP is estimated to have contracted by 4.3 percent in 2020 (compared to 2.5 percent growth in the pre-virus baseline), owing to a decline in commodity exports, tourism, and domestic activities. Growth is expected to recover starting this year, with the initial recovery phase hampered by ongoing pandemic-related disruption. The government has further reprioritized spending towards the COVID19 response and essential services starting in late 2020. The execution of the economic stimulus package announced in 2020 will continue into this year, with about one third of the funds expected to be disbursed in early 2021. The fiscal deficit is estimated to have widened to 2.4 percent of GDP in 2020 from 1.5 percent in 2019 (less than the 3.4 percent deficit expected in the pre-virus baseline, due to a contraction in investment spending).1 The government cash balance remains well below the staff recommended minimum of two months of spending. The fiscal deficit is projected to widen further in 2021 due to continued execution of the economic stimulus package and higher spending on public investment projects. Higher development expenditure is expected to be sustained over the next several years, reflecting an ambitious pipeline of infrastructure projects. International reserves stood at around 10.2 months of prospective imports in December 2020. The better-than-expected external position compared to the June 2020 RCF/RFI request projection reflects, among other factors, a smaller-than-expected decline in logging exports and delays in infrastructure projects, which contributed to lower imports. The current account deficit is projected to increase in 2021. The total external financing gap, before RCF/RFI disbursement and additional budget support from development partners, was projected at around US$38.8 million (about 2.5 percent of GDP) at the time of the June 2020 RCF/RFI program request.2

Public health and macroeconomic policy response. Thanks to strong and timely COVID-19 containment measures, local transmission of the disease has been avoided. As a result, the focus of the public health response has been on prevention and containment. The planned pandemic-related increase in health care spending and support for the economy amounts to about 3.6 percent of GDP. Additional support to those who lost their jobs has been provided through exceptional early withdrawals from the National Provident Fund (with total withdrawals amounting to about 0.7 percent of GDP). The 2021 budget is expected to be presented to the parliament in March and to focus expenditure on the COVID-19 response, and in line with the governments redirection policy, to include support for accelerating the economic recovery, including through additional resources to the productive and resource sectors and to infrastructure investment. Monetary policy remains accommodative and the central bank has recently purchased government bonds in the secondary market.

Solomon Islands: COVID Related Fiscal Measures Central government

(In percent of GDP)

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IMF staff estimates. Social spending includes spending on Women, Youth, and Children, Rural Development, and Land, Housing and Survey.

Post-COVID forecasts use the recently published rebased GDP series (with 2012 as base year). Pre COVID-19 ratios have been recomputed using the new GDP series for comparability.

Governance safeguards. An Oversight Committee has been established to oversee the COVID-19 stimulus spending and guard against any abuse or misuse of the package, including through an ongoing multistage monitoring and evaluation process. While the implementation of the fiscal stimulus package continues, the government has published information on recipients whose applications for stimulus funds have been approved thus far on its website. The authorities have also committed to publication of an audit by the Solomon Islands Office of the Auditor General of COVID-19 related expenditures (before December 2021) and documentation on crisis-related procurement, including the names of the entities awarded the contracts and their beneficial owners.

IMF support status. Solomon Islands has received emergency support under the RCF/RFI (approved on June 1, 2020) for an amount of SDR 20.8 million (about US$28.5 million, 100 percent of quota) to help cover urgent balance of payments needs stemming from the COVID-19 pandemic. The RCF/RFI disbursement is used to provide balance of payment support and was made to the Central Bank of Solomon Islands.

Upcoming debt service. Solomon Islands has debt service of SDR 0.104 million to the Fund falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the 3rd tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Solomon Islands is pursuing appropriate macroeconomic policies to address the domestic impact of the pandemic. Fund debt service relief under the CCRT and support under the RCF/RFI will be used to maintain macroeconomic stability, thus safeguarding public health, supporting livelihoods and the economic recovery. Fund support is also playing a catalytic role in respect of budget financing from development partners for emergency support to mitigate the impact of the pandemic on the lives and livelihoods of the population.

Table 1.

Solomon Islands: Selected Economic Indicators, 2017–25

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Sources: Data provided by the authorities; and IMF staff estimates and projections.

Pre COVID-19 forecasts are from the 2019 Article IV. Post-COVID forecasts use the recently published rebased GDP series (wtih 2012 as base year). Pre COVID-19 ratios have been recomputed using the new GDP series for compatability.

Includes disbursements under the IMF-supported programs.

The presentation follows the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6).

Includes SDR allocations made by the IMF to Solomon Islands in 2009 and actual and prospective disbursements under the IMF -supported programs.

Total spending is defined as total expenditure, excluding grant-funded expenditure.

Annex XXVI. Republic of Tajikistan: Update for CCRT Debt Relief

Recent Economic Developments.1 The COVID-19 pandemic has had an adverse impact on Tajikistan’s economy in 2020H1. However, as the containment measures were gradually relaxed, the economy started to rebound in 2020H2. Real GDP grew by 4.5 percent in 2020, some 3½ percentage points above the projection made at the time of the October CCRT board paper. The better than envisaged outcome is mostly due to continued remittance inflows and an earlier than expected reopening of the economy amid stepped up sanitation and social distancing measures. Activity in agriculture, manufacturing, and mining sectors were especially resilient. While the 2020 fiscal deficit deteriorated by 2½ percentage points to 4½ percent of GDP, this outcome was much better than the 6.0 percent deficit expected at the time of the CCRT board paper. Revenues overperformed given stronger-than-expected growth outcomes, while expenditures remained relatively constant. For the most part, capital spending was implemented as planned, while COVID related spending measures were accommodated by deep cuts in other current expenditures. Health care spending was lower than anticipated through October given less need.

Despite a sharp drop in non-mineral exports, the current account deficit remained at 2.3 percent of GDP in 2020 on the back of higher gold exports and some expenditure switching following a depreciation of the Somoni against the US dollar. A weaker currency also supported remittance inflows, with remittances growing by almost 2 percent in Somoni terms in 2020. International reserves rose given the NBT’s purchases of domestic gold, higher gold prices, donor support, and the RCF disbursement. Growth is expected to recover to 6 percent in 2021. In 2021, despite an expected uptick in imports as the COVID-19 shock dissipates and domestic demand recovers, the current account balance is expected to stay at a similar level (as a share of GDP) as a result of a further pick up in gold exports and remittance inflows. The 2021 fiscal deficit is expected to remain relatively constant at about 4½ percent of GDP.

The government took several measures in 2020 to combat the pandemic. The authorities deferred tax collections, increased health, and social spending, and eased monetary and fiscal policies. The actual 2020 fiscal outturn reflected an increase in healthcare expenditures by about 1 percent of GDP and restructured and expanded social assistance transfers to the population. The targeted social assistance program was rolled out to an additional 28 districts, covering the entire country. Moreover, eligible families received a TJS 400 per year grant, which was increased further to TJS 464. The government also provided a one-time COVID assistance of TJS 500 to vulnerable groups. Overall priority expenditures as a percent of public spending, rose by about 5 percentage points in 2020 to 44 percent. Deferred tax payments and postponement of the administrative price increases provided liquidity support to households and businesses. For 2021, with the pandemic easing and many of the time bound measures lapsing, the authorities assume that health care expenditures will decline relative to 2020 by about a ½ percentage point of GDP to some 2.6 percent. Education spending, however, will increase by ¾ of a percent point to 6.1 percent of GDP. In comparison to pre-COVID assumptions and in line with budget plans, projected 2021 priority expenditures are up by about 1.2 percent of GDP (and up by some 4.4 percentage points of overall spending).

Tajikistan: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Governance safeguards. The authorities are making credible efforts to implement transparency measures. They have published quarterly reports on the COVID fiscal spending in 2020 and are working to prepare an audit of COVID related spending by April 2021. A new Public Procurement Law (PPL) is expected to be sent to the Parliament in Q1 2021. Starting from January 2021, all procurement is expected to be switched to the newly developed e-procurement system. The system covers all procurement methods envisioned in the PPL and is fully integrated with the MIS of the Ministry of Finance, Tax Committee, and the payment system.

IMF support status. Tajikistan has received emergency support under the RCF equal to 80 percent of the quota. The country has expressed interest in a new ECF facility.

Upcoming CCRT-eligible debt service. Tajikistan has debt service of SDR 3.9 million falling due during the interval from April 14, 2021 to October 15, 2021.

Staff assessment. Staff assesses that Tajikistan is pursuing appropriate macroeconomic policies to address the global pandemic. The CCRT debt relief has supported FX liquidity to the market and boost external buffers in a very uncertain environment. Staff also assesses that the authorities are making credible efforts to use the support from the Fund, to help provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on lives and livelihoods.

Table 1.

Tajikistan: Selected Economic Indicators, 2018–26

(Quota: SDR 174 million)

(Population: 9.3 million; 2019)

(Per capita GDP: US$857; 2019)

(Poverty rate: 26 percent; 2019)

(Main exports: aluminum, gold, cotton; 2019)

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Sources: Data provided by the Tajikistan authorities, and Fund staff estimates.

Annex XXVII. United Republic of Tanzania: Update for CCRT Debt Relief

Recent Economic Developments. According to the government the economy grew 4.7 percent in the first three quarters of 2020, surprising on the upside. However, high frequency indicators suggest a much more subdued pace of economic activity, and growth is expected to remain subdued in 2021 at about 2 percent.1 The impact of lower global demand on the tourism sector, and the large cuts in government development spending due to revenue shortfalls and financing constraints, are the main drivers of the deceleration in activity. The pandemic is estimated to have reduced revenues by 1.2 percent of GDP in FY2020/21, with the government expected to reduce spending by more than 3 percent of GDP resulting in a smaller deficit of about 1 percent of GDP. While the pandemic reduced tourism receipts by almost 60 percent in 2020, Tanzania has benefited from higher gold prices and lower oil prices. The net impact leads to a projected, widening of the current account deficit to 4.3 percent of GDP in FY2020/21, opening a financing gap of about 1 percent of GDP. Although Tanzania has a nominally floating exchange rate, the external shock resulted in international reserves declining by almost US$0.8 billion in 2020, and a projected further decline to US$3.5 billion by end-June 2021, which will leave the country with 4 months of prospective imports in reserves. The financial system remains stable despite an uptick in NPLs, supported by an accommodative monetary stance.

Public health and macroeconomic policy response. The government maintains that Tanzania is free of local COVID-19 transmission and has not reported cases nor deaths to the WHO since May 2019. However, there are signs that a second wave of the pandemic is ongoing in the country. Furthermore, the authorities are currently not planning to participate in the COVAX initiative nor purchase vaccines on their own. More recently the authorities have recommended the public to follow health guidelines (e.g. frequent hand washing) to prevent the spread of respiratory illnesses. The authorities’ fiscal response to the pandemic has been limited to about 0.1 percent of GDP in FY2020/21, primarily to increase transfers to low-income households. The resources freed by the first two tranches of the IMF’s debt relief under the CCRT are being used to maintain priority spending which is expected to increase by ¼ percent of GDP in FY 2020/21, relative to pre-COVID projections. In particular, the government is focused on improving health and education services, including purchases of medicine and equipment and enhancing educational infrastructure safety in primary and secondary schools. The authorities have not adopted any economic support measures for businesses and sectors affected by the pandemic.

Tanzania: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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October 2019 WEO projections.

Governance safeguards. The authorities remain committed to undertake and publish ex-post audits of Covid-19 related spending. The office of the Auditor General in consultation with the relevant partners providing funding will undertake and publish an ex-post audit of COVID-19 related spending to ensure the appropriate use of funds. The audit is expected to commence in FY2021/22, given that the space provided by debt relief under the CCRT began being used for spending during the current fiscal year (FY2020/21). The authorities also continue working on implementing governance measures related to the AML/CFT framework and the repayment of expenditure arrears. The reluctance of the authorities to publish data related to the pandemic (tests, infections, fatalities, impact on the health sector) may raise broader concerns about the authorities’ commitment to transparency and accountability.

IMF support status. The authorities requested support under the RCF/RFI, but discussions were paused before the October 2020 general elections and have not yet resumed.

Upcoming debt service. Tanzania has no remaining outstanding debt to the IMF, and therefore will no longer benefit from debt service relief under the CCRT.

Staff assessment. Staff assesses that Tanzania’s macroeconomic policies are broadly adequate to maintain macroeconomic stability, but insufficient to address the health and economic challenges posed by the global pandemic, and considerable downside risks remain. Substantially more could be done to provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on lives and livelihoods of the population affected, and to support badly affected sectors such as tourism and hospitality. The reluctance of the authorities to fully and transparently recognize and address the extent of the health challenges could derail the economic recovery and place the country in a lower growth path over the medium term. Close cooperation with the WHO and the African CDC, careful planning to acquire and distribute vaccines, and prioritizing social spending in health and education would significantly reduce risks and anchor the economic recovery. The governance safeguards put in place, and the authorities’ commitment to use IMF debt relief to maintain priority spending ensure that resources are appropriately used to provide emergency support to mitigate the impact of the pandemic on the population and the economy.

Table 1.

Tanzania: Selected Economic Indicators, 2016/17–2023/241

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Sources: Tanzanian authorities and IMF staff estimates and projections.

Fiscal year (July-June).

Historical figures are based on official data up to the fourth quarter of 2019.

Excludes liquidity management papers and domestic arrears.

Excludes external debt under negotiation for relief.

Includes investments made by parastatals and other public sector insitutions.

Historical figures are based on official data up to 2019.

Priority social spending comprises transfers (recurrent and development) for education, health, water, and rural road maintenance.

Annex XXVIII. Togo: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 crisis is eroding the hard-won macroeconomic gains of recent years. Economic growth is projected at 0.7 percent in 2020 and 3.0 percent in 2021, compared to pre-COVID-19 projections of 5.5 percent for each of these years. The World Bank’s latest estimates suggest that extreme poverty (assessed at about 45 percent in 2019 and originally expected to recede in 2020) has increased by one percentage point. Thanks to strict health and containment measures, the number of COVID-19 cases in Togo was significantly below the WAEMU average in 2020, but this has started to change with the second wave of infections observed since January 2021. As of February 22, the total number of confirmed cases since the start of the pandemic reached 6,348 with 81 deaths and 944 active cases. The overall fiscal deficit is estimated to have reached 6 percent of GDP in 2020 and is budgeted at the same level in 2021, compared with pre-COVID-19 projections of 1.9 percent of GDP in 2020 and 1.5 percent of GDP in 2021. The associated additional balance of payments needs resulting from the COVID-19 crisis amounted to about 2½ percent of GDP in 2020 and are tentatively estimated in the range of 2–3 percent of GDP in 2021, depending on the amount of COVID-19-related spending including the cost of vaccinations. The public debt-to-GDP ratio is estimated to have reached 60.8 percent at end-2020 and is projected to increase to 63.2 percent at end-2021.1

Public health and macroeconomic policy response. Togo is implementing a comprehensive response plan focused on: (i) containment and mitigation measures; (ii) upgrading of the health system; (iii) support to vulnerable households; and (iv) support to the private sector. Pending data on the actual 2020 outcome, staff estimates priority expenditures at 6.4 percent of GDP in 2020, which is 0.5 percent of GDP higher than pre-COVID-19 projections, primarily because of emergency outlays to rehabilitate hospitals and health centers. Priority expenditures are projected at 6.2 percent of GDP in 2021 with a larger budget allocation for education and reduced health spending, reflecting the discontinuation of one-off spending in 2020 to upgrade medical facilities. Other COVID-19-related spending is estimated at about 2 percent of GDP in both 2020 and 2021, of which about 0.5 percent of GDP is potentially for the vaccination campaign in 2021. In combination with financing from the COVAX initiative, this would be sufficient to vaccinate at least 40 percent of the population. Togo’s debt service to the Fund falling due during the period covered by the CCRT initiative (24 months from April 14, 2020), amounts to SDR 5.17 million in 2020 and SDR 1.76 million in 2021, which is about 4 percent of the spending associated with COVID-19 in 2020 and 1 percent in 2021.

Togo: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020. These ratios differ from the previously published ratios due to the rebasing of Togo’s GDP, which has raised estimates of Togo’s GDP by about 35 percent.

Togo did not publish pre-COVID estimates based on a functional classification. Priority expenditures are staff estimates based on the overall size of the pre-COVID medium-term budget.

Revenue loss estimated as the difference between current revenue estimates and pre-COVID revenue projections.

Governance safeguards. Financial contributions from donors are deposited in a special account at the central bank (BCEAO). The authorities restricted the use of some financing items in the supplementary budget for 2020 to COVID-19-related actions. They have initiated an audit of COVID-19 spending by the Auditor General. A new mobile cash-transfer program, NOVISSI, aiming to support vulnerable informal workers was launched in 2020. Spending on this program amounted to about half of the total sum used for transfers to households in 2020 and is transparently reported on a dedicated web site.

IMF support status. Togo had an ECF-supported program during 2017–20. The final review was completed in April 2020, which also included an augmentation of access from 17.1 percent of quota in the original request to 65.8 percent of quota to address the impacts of COVID-19. The authorities made an official request for a new UCT-quality program in February 2021.

Upcoming CCRT-eligible debt service. Togo’s debt service to the Fund, falling due during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the third tranche of debt service relief under the CCRT, amounts to SDR 0.88 million.

Staff assessment. Staff assesses that Togo is pursuing appropriate macroeconomic policies to address the impact of the global pandemic. As noted in the references above on public health and governance, staff also assesses that the resources freed by the first and second tranches of Fund debt service relief under the CCRT, and other support from the Fund, are being used to provide emergency health, and social and economic support to mitigate the impact of the pandemic on the lives and livelihoods of people.

Table 1.

Togo: Selected Economic and Financial Indicators, 2019–26

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Sources: Togolese authorities and IMF staff estimates and projections.

Before the GDP rebasing, which resulted in an upward revision of Togo’s GDP by about 35 percent on average.

Excluding transaction with the Social Security Fund, CNSS, in 2019.

Includes state-owned enterprise external debt.

Includes domestic arrears and state-owned enterprise domestic debt.

Includes domestic arrears.

Annex XXIX. Republic of Yemen: Update for CCRT Debt Relief

Recent Economic Developments. The ongoing conflict has crippled Yemen’s economy and pushed the country into an acute humanitarian crisis. The UN estimates that more than 24 million people— some 80 percent of the population—are now in need of humanitarian assistance. COVID has aggravated this already-dire situation. With little testing capacity, it is likely that the 2,300 reported cases highly underestimate the spread of the virus among a vulnerable population. Meanwhile, desperately needed foreign assistance and remittances have collapsed during the pandemic. Foreign exchange reserves are now nearly exhausted, and economic activity is estimated to have contracted by 5 percent in 2020. Fiscal revenues have declined with lower oil prices, while expenditure needs have increased resulting in a higher fiscal deficit. With limited alternative resources, the central bank in Aden has resorted to monetary financing of the deficit. As a result, the exchange rate has depreciated by 43 percent since the start of 2020, further eroding purchasing power for critical food and medical imports. Food prices have increased by around 45 percent over the same period. As the global pandemic continues, and absent an effective resolution to the conflict, the economic outlook for 2021 is bleak, with growth projected at 0.5 percent, 5.5 percentage points below the pre-COVID forecast. Significant additional external financing will be needed just to maintain a very basic level of critical imports.

Public health and macroeconomic policy response, including on the use of financial resources freed up by the debt relief. Despite the lack of resources and weak institutional capacity, Yemen implemented emergency policies to confront the health crisis, including containment measures and additional COVID and priority expenditures of about 0.9 percent of GDP. Containment measures included school and business closures, bans on public and religious gatherings, and a shutdown of border points. The authorities established emergency facilities, procured test kits and additional ventilators, increased ICU capacity, deployed a public campaign on personal hygiene, and enlisted healthcare workers. The authorities also allocated emergency funds to support local quarantine centers with medical equipment, including by reallocating non-priority outlays. Going forward, priority expenditures, including on health and education, and modest COVID-related support are expected to be maintained. The government is engaging with donors and development partners on its vaccination strategy, with COVAX expected to cover about 23 percent of the population.

Yemen: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Governance safeguards. The authorities established a high-level interministerial committee, to oversee COVID-related spending, prioritize expenditures and monitor implementation. The authorities are also receiving Fund technical assistance on budget execution and cash management to enhance transparency and help improve accountability in fiscal operations.

IMF support status. Yemen is not currently under a Fund-supported program and has not received emergency support under the RCF. On April 15, 2020, the Board approved disbursements under the first tranche for CCRT for SDR 14.4 million. On October 2, 2020 additional CCRT support was approved under the second tranche for SDR 10.96 million.

Upcoming debt service. Yemen has debt service of SDR 17.05 million falling due to the Fund during the interval from April 14, 2021 to October 15, 2021, the maximum period covered by the third tranche of debt service relief under the CCRT.

Staff assessment. Staff assesses that Yemen is pursuing broadly appropriate macroeconomic policies to address the pandemic amidst conflict and very limited resources. Data challenges due to the ongoing conflict and weak institutional capacity complicate the assessment of the macroeconomic outlook. The authorities, in coordination with WHO and UN, have made progress in addressing the ongoing health shock in a highly constrained environment and are working with development partners on a vaccination strategy. Staff also assesses that the resources freed up so far due to Fund debt service relief under the CCRT are being used to help provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on lives and livelihoods.

Table 1.

Yemen: Selected Economic Indicators, 2018–22

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Sources: Yemeni authorities; and IMF staff estimates.

2018 debt data to September 30.
5

To be eligible for assistance from the CCRT, a member country has to be PRGT-eligible and have an annual per capita gross national income level that is less than the IDA operational cut-off level (or less than twice that level for small states); in April 2020, the cut-off level (applied to 2018 national income data) was $1,175.

6

See Catastrophe Containment and Relief Trust—Policy Proposals and Funding Strategy (SM/20/74, March 23, 2020) and associated Decision approved on 03/26/20.

7

The new alternative test defines a QPHD as a life-threatening global pandemic inflicting severe economic disruption across the Fund’s membership and creating balance of payments needs on such a scale as to warrant a concerted international effort to support the poorest and most vulnerable countries through substantial additional grant support and debt service relief. See Catastrophe Containment and Relief Trust—Approval of Grant Assistance for Debt Service Relief approved on 04/13/20.

9

Several countries received financial support through multiple channels: São Tomé and Principe (RCF and ECF augmentation), Benin (ECF augmentation and RCF/RFI), The Gambia (new ECF, RCF and ECF augmentation), Afghanistan (RCF and new ECF).

10

Comparing January 2020 and January 2021 WEO vintages.

11

Please see country annexes for The Gambia, Comoros, Democratic Republic of Congo, Djibouti, Madagascar, Mali (TA and follow-up required), Nepal, São Tomé and Príncipe (TA requested), Tanzania (RCF/RFI discussions paused), Tajikistan, and Yemen (limited Fund engagement).

12

As noted in the Country Annexes, a handful of countries (Comoros, Democratic Republic of Congo, Djibouti, The Gambia, Nepal, and Yemen) have some data gaps, particularly for 2021 (Guinea), which hamper a complete staff assessment.

13

A contribution agreement with the European Union was signed on March 17, 2021. The total amount of EUR 183 million (SDR 153 million) will be held, on an interim basis, in the newly established Interim EU Subaccount – see Framework Interim Account—Establishment of the Interim European Union Subaccount (the “Interim EU Subaccount”) (EBS/21/10, 2/23/21). Of the total, an initial installment of approximately SDR 141 million will be transferred to the CCRT in support of the third CCRT tranche, while the remaining portion could be used to provide assistance in the context of the fourth or future tranches, provided that any unused funds would have to be returned to the EU, if requested by the EU.

14

The disbursement from France could take place in July 2021, followed by the first disbursement of four annual installments from the Philippines in September 2021.

15

Cash balances in the CCRT amounted to SDR 145 million as of March 16, 2021. In addition, cash resources of approximately SDR 141 million will be available in the Interim EU Subaccount to support the third tranche of CCRT debt relief. Barring any additional CCRT requests and assuming projected disbursements of existing pledges, the CCRT’s cash balance is projected to be SDR 164 million at the end of the third debt relief tranche on October 15, 2021, modestly above the pre-COVID balance of SDR 150 million. This amount remains lower than what is needed to address the original (pre-COVID) CCRT underfunding estimated at between SDR 200–275 million.

1

The World Bank estimates that poverty rose to 61–72 percent from 55 percent in 2017.

2

FY2020 COVID-19 spending items to be audited comprise of health spending, including for building hospitals; the bread distribution and wheat purchase programs; package to support agriculture; and transfers to provinces for COVID-19 response.

1

See IMF Country Report No. 2021/014 (January 2021).

2

In August 2019, Nigeria closed its land border with neighbors, negatively impacting informal trade and revenue collection. In December 2020, the Nigerian authorities announced the immediate reopening of the land border-crossing point with Benin. Nonetheless, traffic remains limited. A bilateral working group has been set up with the objective of fully resuming the land trade by end-May 2021.

3

Letter of Intent accompanying the emergency support request under the RCF/RFI (IMF Country report No. 2021/014, December 2020).

1

Burundi registered 1,686 cases as of February 4, 2021, more than double the number of cases as of December 28, 2020 (833 cases). The mortality rate remains very low with two additional COVID-related deaths during the period (a total of three deaths as of February 4, 2021).

1

The latest published Debt Sustainability Analysis is available here.

2

The extent of the total increase in healthcare spending remains to be assessed as data are not yet available on health spending financed by donor project support.

3

The RCF/RFI letter of intent indicated the procurement documents would include ex-post validation of delivery, names of awarded companies, and their beneficiary owners.

1

Ethiopia’s fiscal years run July 8 – July 7.

2

See the website for the Ethiopian Public Procurement and Property Administration Agency, www.ppa.gov.et.

1

IMF Country Report No. 2021/029 Request for Disbursement Under the Rapid Credit Facility Staff Report (February 2021), including a Debt Sustainability Analysis (DSA).

2

Out of a population of around 1.9 million.

3

The report can be found at the Ministry of Finance’s website.

1

In October 2020, Haiti’s statistics institute released re-based national accounts that produced a large upward revision in nominal GDP by 65 percent (FY2019). This has led to a significant improvement in most fiscal, debt, and external ratios. The overall fiscal deficit was 2.3 percent of GDP in FY2020 and public debt is now around 25 percent of GDP. See Table 1.

1

Liberia’s fiscal years runs from July to June.

1

Malawi has been approved for participation in the COVID-19 Vaccines Global Access (COVAX) Facility. The vaccines are expected in the second quarter of 2021 to cover 20 percent of the population (3.8 million people), starting with high risk groups. In addition, 100,000 doses covering 0.5 percent of the population have been secured through the African Union.

1

On August 28, 2019, the Executive Board of the International Monetary Fund (IMF) approved a new three-year arrangement under the IMF’s Extended Credit Facility for Mali in the amount of SDR 139.95 million (about US$191.9 million, 1.1 percent of GDP), of which about US$115.3 million (0.6 percent of GDP) has been disbursed.

1

Reported infection rates may substantially understate true infection rates due to insufficient testing.

2

This high value reflects ongoing large investments in extractive industries by international companies, financed almost entirely by linked FDI.

2

The pre-COVID projection included a very ambitious 41 percent nominal increase in health spending

2

Several of these projects have been delayed longer than originally expected. Based on recent information, staff assess that the implementation of delayed projects, including large infrastructure projects (e.g., road and energy projects) should resume fully in 2022.

1

Pre COVID-19 forecasts are from the 2019 Article IV. Post-COVID forecasts use the recently published rebased GDP series (with 2012 as base year). Pre COVID-19 ratios have been recomputed using the new GDP series and pre COVID-19 2020 growth projection for comparability.

2

Solomon Islands: Requests for Purchase under the Rapid Financing Instrument and Disbursement under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for the Solomon Islands (imf.org)

1

Tourist arrivals declined by 59 percent in 2020, cement and electricity production up to September were down 5 and 7 percent, respectively. Government spending in 2020 contracted by 8 percent with double digit declines in goods and services (-18.6 percent), and development spending (-17.4 percent), along with lower revenue collections on VAT (-0.5 percent) and excises (-2.2 percent). Credit to the private sector also decelerated to 3 percent in December 2020, down from 11 percent a year earlier.

1

The most recent DSA was included in the staff report for the Sixth Review Under the ECF Arrangement, IMF Country Report No. 20/107, April 2020,https://www.imf.org/en/Publications/CR/Issues/2020/04/16/Togo-Sixth-Review-under-the-Extended-Credit-Facility-Arrangement-and-Request-for-49334.

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Cover Policy Papers
Catastrophe Containment and Relief Trust—Third Tranche Of Debt Service Relief In The Context Of The COVID-19 Pandemic
Author:
International Monetary Fund. Finance Dept.
,
International Monetary Fund. Strategy, Policy, &
,
Review Department
, and
International Monetary Fund. Legal Dept.
Volume/Issue:
Volume 2021: Issue 023
Publisher:
International Monetary Fund
ISBN:
9781513576589
ISSN:
2663-3493
Pages:
107
DOI:
https://doi.org/10.5089/9781513576589.007