Catastrophe Containment and Relief Trust—Fourth Tranche of Debt Service Relief in The Context of The Covid-19 Pandemic and Approval of Additional Beneficiary Member Countries
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International Monetary Fund
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Publication Date:
08 Oct 2021
eISBN:
9781513594811
Language:
English
Keywords:
CCRT instrument; CCRT beneficiary country; CCRT grant assistance; CCRT-beneficiary country; CCRT tranche
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The paper provides brief updates for each CCRT-eligible country on its policy responses to the pandemic and on staff’s assessments of these policies, the use of resources freed up by debt service relief, and the implementation of governance safeguards commitments. The paper also provides an update on the financial situation of the CCRT. The generous support from 17 donor countries and the EU has mobilized SDR 609 million in new pledges since the onset of the pandemic.

Abstract

The paper provides brief updates for each CCRT-eligible country on its policy responses to the pandemic and on staff’s assessments of these policies, the use of resources freed up by debt service relief, and the implementation of governance safeguards commitments. The paper also provides an update on the financial situation of the CCRT. The generous support from 17 donor countries and the EU has mobilized SDR 609 million in new pledges since the onset of the pandemic.

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

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

  • Human toll: CCRT-eligible countries continue to see a high rate of new cases in the context of a challenged and uneven vaccine rollout. Cumulative cases have risen to over 2 million while associated deaths have exceeded 38 thousand; both have almost doubled since April 2021 (see Figure 1).

  • Economic toll: According to the latest WEO outlook, real GDP growth in CCRT-eligible countries is projected to remain slower than the pre-COVID forecasts in 2021, despite the sharp GDP contraction in 2020 compared to pre-COVID projections. The performance is weaker than in the wider group of low-income developing countries (LIDCs) and is in sharp contrast to the prospective solid recovery in the advanced economies (AEs) and emerging market and developing economies (EMDEs) (see Table 1).

Figure 1.
Figure 1.

Human Toll of COVID-19 in CCRT Countries

(September 15, 2021)

Citation: Policy Papers 2021, 063; 10.5089/9781513594811.007.A001

Source: Johns Hopkins University, COVID-19 Statistics.
Table 1.

Real GDP Growth Across IMF Member Groups (Percent)

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Source: Staff calculations.

January 2020 WEO.

July 2021 WEO.

2. To date, the Executive Board has approved three tranches of debt service relief, totaling SDR 520 million, for all CCRT-eligible members with eligible debt service falling due to the Fund, in the period from April 14, 2020 through October 15, 2021 (Table 5).

Table 2.

CCRT Countries' Fund Engagements Since the Last Update in March 2021 (Number of countries)

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Source: Staff calculations.

Prospective reviews exclude those of countries whose program request was approved or another review was completed in recent months. Thus each country appears in the table at most once.

Table 3.

COVID-19 Related Fiscal Measures Adopted by CCRT Countries

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Source: Staff calculations.

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

Table 4.

New Countries Eligible for CCRT Debt Service Relief

(as of September 13, 2021)

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Eligible debt service includes principal payments under the PRGT and estimates for the GRA charges.

Eligible debt service starts from the date of the Board approval of CCRT debt relief, currently expected on October 8, 2021.

Table 5.

Eligible Countries and Eligible Debt Service Relief for the CCRT Tranches

(As of September 13, 2021; in SDRs)

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Source: IMF Finance Department.

Given the flexibility provided in the Trust Instrument, the duration of the third tranche was two business days longer than six months to provide grants for debt service relief to two eligible members (Yemen and Malawi), whose CCRT eligible repayment obligations (totaling close to SDR 7.4 million) fall on national holidays observed on October 14 and October 15, 2021, respectively. The third tranche was approved by the Board on April 1, 2021.

Subject to sufficient resources being secured.

In view of the absence of a government of Afghanistan that is recognized by the international community, staff will not propose Afghanistan (AFG) for inclusion in the fourth tranche of debt service relief at this point.

Eligible debt service includes estimates for the GRA charges for Ethiopia, Comoros, Kyrgyz Republic, and Lesotho. Principal repayment obligations for Comoros, Kyrgyz Republic, and Lesotho amount to SDR 623,000, SDR 8,562,800, and SDR 3,144,500, respectively. There are no principal repayment obligations on the CCRT- eligible debt for Ethiopia.

For the Kyrgyz Republic and Lesotho, the amounts listed in the fourth tranche column include principal payments falling due on October 1 5, 2021 in the amount of SDR 951,400 and SDR 2,008,500, respectively.

3. CCRT-eligible members have also benefitted from other IMF financial support and a new general SDR allocation which became effective in August 2021. Since the onset of the pandemic, the IMF has approved SDR 5.2 billion in financial assistance to 29 CCRT-eligible countries: 28 countries have received financial support through the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI), both emergency financing (EF) instruments; new arrangements under the Extended Credit Facility (ECF) have been approved for four countries (Afghanistan, Democratic Republic of Congo, The Gambia, and Madagascar); and four countries (Benin, The Gambia, Sao Tome and Principe, and Togo) have received augmentations of access under existing arrangements.5 CCRT-eligible countries share of the new General SDR Allocation, effective August 23, 2021, amounts to about SDR 5.8 billion. The SDR allocation will help address the long-term reserve needs while helping the broad membership cope with the impact of the COVID-19 crisis.6

CCRT Eligible Countries: Policy Response and Staff Assessment

4. The economic impact of the pandemic on CCRT eligible countries has persisted, weighing on their balance of payment (BoP) financing needs. Real GDP growth in 29 CCRT-beneficiary countries is expected to stay at a slower pace in 2021 than the pre-COVID projections and reach the pre-COVID level only in 2022, leaving the GDP level substantially lower than the pre-COVID trend in coming years (Figure 2)7 Current projections for general government overall deficit (excluding grants) remain larger than the pre-pandemic projections through 2022, reflecting the persistently weak economic activities and necessity of prolonged support for the economy. On the external side, elevated gross financing needs (GFNs)8 are projected to ease only gradually in coming years with the external debt stabilizing at higher levels.

Figure 2.
Figure 2.

Selected Macroeconomic Projections in CCRT Countries 1/

Citation: Policy Papers 2021, 063; 10.5089/9781513594811.007.A001

Source: IMF staff estimates.1/ Pre-COVID and current projections refer to January 2020 and July 2021 WEO vintages, respectively. 2019 data is actual in July 2021 WEO.2/ The chart shows the average of the CCRT-beneficiary countries that have positive GFNs.

5. CCRT-eligible countries have continued the transition from emergency financing to financing under arrangements that support UCT-quality programs. Since the last update in the context of the approval of the CCRT third tranche in late March, new arrangements have been approved for two members (Democratic Republic of Congo and Madagascar), and four program requests (Burkina Faso, Mozambique, Malawi, and Niger), including new requests received in recent months, are under discussion (see Table 2). Five countries have completed reviews under UCT-quality programs, including one PCI (Afghanistan, The Gambia, Rwanda, Sao Tome and Principe, and Sierra Leone). The evolution of their IMF engagement from emergency financing to UCT-qualitymulti-year Fund-supported programs provides more appropriate financial and policy support, including in the area of fiscal policy and governance and transparency arrangements, as members also begin addressing the medium-term effects of the crisis. Table 2. CCRT Countries’ Fund Engagements Since the Last Update in March 2021 (Number of countries)

6. This trend is supported by accelerating IMF surveillance operations. One Article IV consultation (Guinea) was conducted during the period of the third tranche, and ten missions are scheduled during the remaining full CCRT period.

7. CCRT countries are working on their commitments to enhance accountability and transparency arrangements in the context of COVID-19 related spending, though some implementation delays have been observed.9 Many countries are reporting on COVID-19 related spending and publishing procurement contract information. Most countries have also committed to undertake ex-post audits of crisis-related spending and publish them online, with some of these audits now published (e.g., Burkina Faso, Central African Republic, Rwanda), while some countries are experiencing delays due to technical and other reasons. Most countries committed to publish beneficial ownership information of COVID-related awarded companies, of which several made necessary changes to the procurement legal framework to publish the information on a structural and permanent basis (e.g., Benin, The Gambia, Guinea, Kyrgyz Republic). Several countries are now publishing such information, with a few additional countries publishing legal ownership information only. Delays are reflective of challenges relating to the need to first revise the legal framework for procurement, capacity constraints, and/or the novelty of the measure in some countries. Nine CCRT countries are receiving Fund technical assistance to help address these challenges. Fund staff has also begun providing assistance to support efforts to audit crisis-related spending.

8. The CCRT beneficiary countries have been implementing a set of macroeconomic policy measures to address the pandemic, supported by financial resources freed up by the debt service relief. On average, these countries have boosted priority spending in 2020 relative to pre-COVID projections by some 0.8 percentage points of GDP, as well as other COVID-related spending by an additional 1.7 percent of GDP (Table 3). These are expected to continue in 2021 as priority spending is anticipated to be around 1.4 percentage points of GDP higher than pre-COVID projections, reflecting the need for continued social outlays given the slow economic rebound and continuing threat from new COVID variants. These countries are expected to expand their spending on education and social protection, as well as health-related expenditure. Other COVID-related spending is expected to be some 1.3 percent of GDP in 2021, mainly in the area of prevention and containment, including vaccination programs, and support for households and businesses.

9. Staff assesses that CCRT-eligible countries are generally pursuing appropriate macroeconomic policies in response to the economic fallout from the global pandemic, broadly in line with commitments made to the Fund. Staff also assesses that the resources freed up by the earlier tranches of Fund debt service relief under the CCRT are helping provide emergency health, social and economic support to mitigate the impact of the pandemic on lives and livelihoods of populations.10

Eligibility and Qualification for Assistance Under the CCRT for Two Additional Members

10. On March 26, 2020, in the wake of the COVID-19 pandemic, the Executive Board approved changes to the CCRT Instrument to enable the Fund to provide grant assistance for relief on debt service for its poorest and most vulnerable members affected by the pandemic.11 The Executive Board determined that, effective April 14, 2020, the COVID-19 pandemic constitutes a Qualifying Public Health Disaster (QPHD) under the CCRT, pursuant to the newly-introduced alternative QPHD test (see below), enabling the Fund to approve relief for eligible and qualified members for up to two years from that date. The Fund subsequently approved grant assistance for an initial period of six months, with additional debt service relief for up to two years from April 14, 2020 to be approved subject to the availability of CCRT resources.12 Twenty-nine countries have so far received CCRT debt relief for the period from April 14, 2020 through October 15,2021.

11. The design of the CCRT Instrument takes into account potential resource constraints and provides eligibility and qualification criteria.13 Under the amended CCRT Instrument, debt service relief for pandemics is limited to obligations falling due during a maximum period of two years from the declaration of a QPHD. To address resource constraints, the debt service relief is provided in tranches, to meet the most pressing needs while fundraising continues and avoid a “first-come, first-serve” dynamic

  • Eligibility for the CCRT, under the CCRT Instrument, is limited to PRGT-eligible members with annual Gross National Income (GNI) per capita below the IDA operational cut-off (or twice that cut-off for small states).14 Accordingly, the list of eligible countries is not fixed as of a specific cutoff date; rather, it can evolve to reflect changes in countries’ GNI per capita. Hence, during the maximum two-year debt relief period, new countries can become CCRT-eligible just as already eligible countries can be determined to qualify. At the same time, members for whom debt relief was approved because they met the eligibility and qualification requirements at the time of the Board decision, do not lose access to the approved debt service relief due to income increases during the two-year period that would affect their CCRT-eligibility.

  • Qualification is determined by the Board’s assessment that (i) a member is facing an exceptional BOP need arising from a global pandemic determined to constitute a QPHD, including the member’s policy response, and (ii) the country’s macroeconomic policy framework put in place to address the BoP need created by the pandemic and the ensuing policy response is appropriate. The alternative QPHD test is a life-threatening global pandemic that inflicts severe economic disruptions across the Fund’s membership and creates balance of payment needs warranting a concerted international effort. The period of debt service relief based on the April 13, 2020 Executive Board’s declaration of a pandemic QPHD is limited to a maximum of two years from the date of the declaration. Qualification requirements are not reassessed for each member at the time of subsequent tranches. Rather they are only assessed at the time of the first approval of debt relief.

12. Based on the latest data, the GNIs per capita for Kyrgyz Republic and Lesotho (both PRGT-eligible countries) have fallen below the IDA operational cut-off thereby meeting the eligibility criteria for the CCRT. GNI per capita for the Kyrgyz Republic and Lesotho in 2020 is below the new IDA operational cut-off (US$1,205) released on July 1, 2021. Also, both countries have eligible debt service to the Fund falling due in the period through April 13, 2022 (Table 4).15

13. The Kyrgyz Republic and Lesotho have requested CCRT grant assistance under the CC Window and staff considers that the qualification criteria are met for these two CCRT-eligible members. The authorities have submitted a letter of intent (LOI) containing a request for assistance from the CCRT grant assistance and outlining the policy responses to the global pandemic and governance and transparency arrangements (see Annex II and IV). Staff assesses that these two countries are experiencing an exceptional balance of payments need arising from the COVID-19 pandemic, including their policy responses, to address the impact of the pandemic, and the authorities are pursuing appropriate macroeconomic policies to address the BoP need.

14. The prospect that member countries may become eligible at a later stage due to a decline in per capita income was not explicitly discussed at the time the policy was adopted in April 2020. That said, the CCRT Instrument allows that additional countries become CCRT-eligible and the Executive Board may decide qualify under the alternative test for CCRT qualification based on the QPHD declared in April 2020. In light of the continuing exceptional BoP needs created by the pandemic, staff therefore recommends the inclusion of the Kyrgyz Republic and Lesotho for debt service relief related to the COVID-19 pandemic, starting from the date of the Board meeting, for the remainder of the two-year period.

Funding Status and Further Relief

15. Thanks to the generous support of 17 Fund members and the EU, the Fund has received grant pledges of SDR 609 million to date, including a recent second pledge by Japan (Table 6). This includes SDR 63.6 million in new pledges made since the approval of the third tranche in April 2021 (Table 2). Greece and Spain committed US$11 million (SDR 7.7 million) and EUR 25 million (SDR 20.7 million), respectively. Japan committed a second grant contribution of US$50 million (SDR 35.2 million) in addition to the US$100 million (SDR 73.4 million) it already disbursed in April 2020. The need to assess the IDA criteria averaged over several years and they will not lose access to the approved CCRT debt relief for the reasons discussed above. European Union plans to transfer the remaining portion (SDR 10.8 million) of its EUR 183 million grant commitment to the CCRT in support of the fourth tranche.16

Table 6.

Contributions to the CCRT

(As of September 22, 2021)

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Source: IMF Finance Department.

SDR value of contributions (received and pending receipt) is expressed in US dollars using the spot exchange rate as of September 22, 2021.

During the third tranche, the EU contributed SDR 141 million to the CCRT. The remaining balance, which is held in the EU Interim Subaccount, could be used for additional CCRT debt relief in the context of the fourth tranche.

Japan made two contributions: US$100 million (April 2020) and US$50 million (September 2021).

Contributed as part of the 2015–17fundraising campaign.

On September 10, 2021, the Philippines contributed SDR 0.7 million to the CCRT as the first annual installment of its pledge.

16. Total pledges to date still fall significantly short of the SDR 1 billion fundraising goal, and remain below the cost of two full years of COVID-related debt relief (estimated at SDR 692 million including newly eligible members).17 The generous support by donors to date has been critical to deliver 18 months of debt relief, and the most recent pledges by Japan, Greece, and Spain are very important contributions to help fund a further tranche. Staff and management continue to urge other donors to join in this important effort to ensure that COVID-related CCRT relief can be approved for the maximum two-year period through April 13, 2022.

17. In light of the CCRT’s current limited resource level, staff proposes a two-step approach for the remaining period. Under the CCRT Instrument, the Executive Board “shall take into account the availability of resources in the Trust and the likely need of other potentially qualifying members under the Trust” when taking decisions on approving any tranche of CCRT grants. The Instrument leaves broad discretion to the Fund in making this assessment. Taking into account current balances and pledges,18 staff considers that resources are too low to decide at this point on a full six-month fourth CCRT tranche, including debt service relief to the Kyrgyz Republic and Lesotho for the period from the date of the Board meeting up to October 15, 2021, totaling SDR 172.8 million, while maintaining an adequate resource cushion for other potential CCRT-qualifying shocks. Staff also considers that the ongoing reflections related to the expected end of the Debt Service Suspension Initiative (DSSI) at the end of 2021, against a backdrop of continued high uncertainty on the health and economic impact of the COVID-19 pandemic, may have a bearing on donor’s decisions to provide new contributions to the CCRT. Hence, staff proposes a two-step approach for the remaining period: i) an immediate approval of a further period of debt service relief through January 10, 2022, including debt service relief to the Kyrgyz Republic and Lesotho, based on the resources mobilized so far, allowing for more time to secure any additional grant pledges and contributions; and ii) consideration, possibly on a lapse-of-time basis in January 2022 for a final tranche of debt relief through April 13, 2022. The LOT decision would be based on a brief Board paper with an update on resources and a final staff assessment, taking into account the likely needs of other potentially qualifying members. This two-step approach will allow for continued debt service relief while providing more time for additional donor contributions to materialize. It is consistent with the spirit of the tranching approach, approved in April 2020 to reduce the risk of depletion of the CCRT and does not prejudge the outcome of the January decision in view of the broad discretion of the Executive Board in its judgment on adequacy of CCRT resources.

18. More broadly, based on grant pledges to date, substantially more resources will be required to address the underfunding of the CCRT, including the estimated pre-COVID shortfall of SDR 200–275 million. Significant additional grant pledges will be required to reach the funding target of SDR 1 billion to ensure that adequate grant resources are in place to address the needs of members under other CCRT-qualifying shocks in the future. A more comprehensive assessment of resource adequacy and potential demand for CCRT debt relief beyond COVID would be addressed as part of the five-yearly CCRT review envisioned for late 2022/early 2023.

Eligibility Under the CCRT Instrument

19. As noted in paragraphs 11–14 above, changes in the list of CCRT eligible members are possible after a QPHD has been declared when official GNI data change. In the view of staff, this creates uncertainty about the number of eligible countries and needed resources and potentially poses difficulties for fundraising and the delivery of resources to the initial set of identified beneficiaries. At the same time, the current rules allow the Board to approve debt service relief to newly eligible countries that may have an exceptional BoP need resulting from the same QPHD and are similarly situated as those members that were eligible at the time of the determination of a QPHD. Staff proposes to explore changes to the eligibility rules under the CCRT instrument at the time of the next CCRT review, which staff currently plans in late 2022/early 2023, taking into account Directors’ views.

Issues for Discussions

  • 1. Do Directors agree that the Kyrgyz Republic and Lesotho meet the qualification requirements and therefore be included for the remainder of the two-year period?

  • 2. Given the current financial situation of the CCRT, do Directors agree on the proposed approach to tranche further the remainder of the two-year period, with an immediate approval of a tranche through January 10, 2022, and a second decision to be made in January 2022 for the final portion of the full two-year period?

  • 3. What are Directors’ views on the possible amendments in the context of the expected 2022/2023 review, as regards the evolution of income eligibility and tranching in line with evolving GNI data?

Annex I. Kyrgyz Republic: Staff Appraisal—CCRT Request

The Kyrgyz Republic faces exceptional balance of payments needs resulting from the impact of COVID-19 and has requested support under the Catastrophe Containment window of the CCRT.

Economic impact. The COVID-19 crisis led to a sharp recession with output contracting by 8.6 percent in 2020 and by 1.7 percent in H1 2021 compared to the pre-crisis projections of about 4 percent growth annually. The decline in activity was pronounced in exports, gold mining, industry, tourism, transport, and construction. Headline inflation rose to 9.7 percent in 2020 and further to 14 percent in 2021 from 3.1 percent in 2019, primarily due to imported food price inflation and the pass-through from the exchange rate depreciation of 19 percent. The fiscal deficit widened to 3.3 percent of GDP in 2020 from close to a balance due to the sharp decline in tax revenue and higher expenditure on health and other anti-crisis measures. Public debt rose by 16.5 percent of GDP to 68 percent in 2020 reflecting lower output, a higher fiscal deficit, and currency depreciation. A surge in imports following the reopening of borders this year is expected to weaken the current account to a deficit of 7.7 percent of GDP, resulting in balance of payments financing needs even after counting the SDR allocation of about US$242 million.

Macroeconomic policies. The authorities responded swiftly in 2020 with a range of measures to protect public health and mitigate the economic impact of the pandemic. These included emergency health spending, stepping up the food security program for the vulnerable, temporary tax deferrals and subsidized loans for small and medium enterprises. The total fiscal cost of the COVID response amounted to 7.2 percent of GDP. The central bank provided liquidity to banks and temporarily eased enforcement of prudential norms. Since 2021, however, it raised policy rates three times by cumulative 250 basis points in response to rising inflation.

Governance safeguards. A special audit report on all emergency spending is expected to be completed in September/October and will be presented to Parliament and subsequently published. The revised procurement law requires disclosure of beneficial owners in all public contracts starting from the enactment of the law in January 2021. With the support of the USAID, the authorities are developing an online database, which will be accessible to public and contain beneficial ownership information of all public procurement contracts.

IMF program status. The Kyrgyz Republic currently has no Fund-supported program. However, the country was the first IMF member to receive the Fund’s COVID-related emergency financial assistance in two equal disbursements of about US$121 million (50 percent of quota) each under the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF).

Staff appraisal. Staff supports the Kyrgyz Republic’s request for debt relief under the CCRT. The Kyrgyz Republic meets the income threshold with GNI per capita of US$1,160 in 2020 which is below the threshold of US$1,205. Staff assesses that it faces an exceptional BoP need of US$150 million stemming from the impact of COVID-19 and is pursuing appropriate macroeconomic policies to address the crisis.

Upcoming debt service. The Kyrgyz Republic has debt service of SDR 9.19 million (US$12.1 million) falling due in the period of debt service relief from October 8, 2021 through April 13, 2022.

Table 1.

Kyrgyz Republic: Selected Economic Indicators, 2018–2026

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Sources: Kyrgyz authorities and IMF staff estimates and projections.

General government comprises the State government, the Social Fund, and the Mandatory Health Insurance Fund (MHIF). The State government comprises central and local governments.

Includes loans on-lent by the State government to state-owned enterprises in the energy sector.

Calculated at end-period exchange rates.

Twelve-month GDP over end-period broad money.

Gross international reserves exclude reserve assets in non-convertible currencies.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Table 2.

Kyrgyz Republic: Balance of Payments, 2018–2026

(Millions of U.S. dollars)

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Sources: Kyrgyz authorities and IMF staff estimates and projections.

Russian debt write-off.

Public and publicly-guaranteed debt.

Net of rescheduling.

Valued at end-period exchange rate. Gross international reserves exclude reserve assets in non-convertible currencies.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Table 3.

Kyrgyz Republic: Debt Service Due to the IMF, October 8, 2021-April 13, 2022

(As of July 21, 2021)

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Source: IMF staff projections.
Table 4.

Kyrgyz Republic: Implementation Status of Governance/Transparency Measures _ Under the RCF/RFI

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Source: Kyrgyz authorities.

Annex II. Kyrgyz Republic: Letter of Intent—CCRT Request

Bishkek, Kyrgyz Republic

September 13, 2021

Ms. Kristalina Georgieva

Managing Director

International Monetary Fund

Washington, D.C. 20431

Dear Ms. Georgieva:

The COVID-19 pandemic is having severe effects on health and on economic activity across the globe.

We in the Kyrgyz Republic are experiencing an exceptional balance of payments need arising from the pandemic and our response to it, as detailed below. More generally, we are suffering severe shocks in the area of public health and on economic activity:

  • The epidemiological situation in the Kyrgyz Republic worsened considerably from mid-March 2021 with new COVID cases rising from under 100 per day to nearly 2000 per day by end-June. The spread of the virus has declined since then, but the risk of resurgence remains significant due to still low vaccination rates. Because of supply constraints and lack of financing only about 10 percent of the adult population has been fully vaccinated. Containing the mortality rate will require better access to vaccines and improving the quality of our health services.

  • We currently anticipate that: i) real output growth in 2021 will be 2.1 percent, compared with pre-crisis projections of 4 percent; ii) the impact on the budget of rising health and related outlays is estimated at about 1 percent of GDP; and iii) the emerging balance of payments need resulting from the crisis is projected to be about US$150 million (1.8 percent of GDP and 5.5 percent of our end-2020 official external reserves). The BoP need takes into account the new SDR allocation, which helped to strengthen our international reserves. We are also exploring options how to channel these exceptional resources to finance crisis-related spending in 2021 and 2022, including procurement of vaccines.

Our response to the crisis has several dimensions:

We plan to increase health spending by 5.5 billion soms (0.8 percent of GDP) in 2021 to i) procure medical equipment and vaccines, ii) strengthen medical infrastructure and iii) train medical personnel. We also plan to increase compensation for infected and deceased medical workers and general compensation for working in red zones. To support these efforts, the World Bank approved US$20 million, and we expect another US$25 million from the Asian Development Bank to finance vaccines.

  • We are seeking to create budgetary space for these and other outlays to support economic activity, particularly in the poorer areas of the country, by suspending or sharply curtailing outlays not seen as essential to tackling the immediate crisis (including non-health capital expenditure), but still expect an increase in the primary budget deficit by 0.5 percent of GDP. We hope that additional donor support will help meet part of this fiscal financing need, with the remaining financing expected to come from domestic sources.

  • We already raised policy rates by 250 basis points in 2021 to contain rising inflation and are prepared to tighten monetary policy further if second-round inflation pressures emerge. At the same time, we will provide liquidity support selectively to banks if they experience temporary liquidity difficulties. We will maintain and enhance exchange rate flexibility to support our balance of payments and help narrow the financing gap if warranted.

Against this backdrop and given the large balance of payments need created by the impact of the coronavirus, we hereby request grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT) to cover our debt service to the IMF falling due in the period from October 8, 2021 to April 13, 2022, or as much as is available from resources. This debt relief will free up budgetary resources to address public health needs and support economic activity in key sectors; it will also help contain the exceptional balance of payments need resulting from the pandemic.

We are working closely with IMF staff in seeking to maintain broad macroeconomic stability during the current global pandemic and will continue to do so in the post-pandemic recovery period. We received support from the IMF’s Rapid Credit Facility and Rapid Financing Instrument in March and May 2020, in the amount of SDR 177.6 million (100 percent of quota). We are confident that strong IMF support for our country will help catalyze wider support from other development partners.

We authorize the IMF to publish this letter and all staff Board documents related to this request for debt relief from the CCRT.

Sincerely yours,

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Annex III. Kingdom of Lesotho: Staff Appraisal—CCRT Request

Summary. The Kingdom of Lesotho faces exceptional balance of payments (BoP) needs resulting from the impact of COVID-19 and has requested support under the Catastrophe Containment window of the CCRT.

Economic impact. COVID-19 has caused widespread social and economic disruption, heavily impacting many key sectors—including construction, mining, and textiles. Remittances, labor flows, and exports collapsed, while heavy rains and border closures caused a recent surge in food price inflation. The pandemic also set back development, disrupted education, compounded pre-existing inequalities, and disproportionately impacted women and other vulnerable groups. The projected drop of Southern African Currency Union (SACU) revenues has added pressure to the external and fiscal positions and economic activity is estimated to have declined by 5.3 percent in FY20/21 before recovering to 2.8 percent in FY21/22.1 This compares to pre-pandemic forecasts of -0.2 and 3.7 percent for FY20/21 and FY21/22, respectively. The contraction in FY20/21 compounds an already 3-year long recession, which will see the real economy shrink by 8 percent since FY17/18. Sources of growth going forward remain uncertain but require a scaling back of government to provide space for the private sector to develop and eventually drive growth. The current account deficit is expected to widen significantly to 13.3 percent in FY21/22 due to pandemic-related spending and the anticipated fall in SACU transfers. Even with the SDR66.9 million (US$95 million) allocation, a BoP need of US$143 million (6 percent of GDP) remains for the next three years.

Macroeconomic policies. The government temporarily loosened macroeconomic and financial policies to accommodate the impact of the pandemic. Fiscal measures, including the use of tax deferrals, addressed both social protection and economic mitigation and amounted to 3.8 percent of GDP. These included the purchase of critical goods and services, security and border management, payments to informal-sector vendors, support to SMEs (grants and rental payment support), partial credit guarantees, and subsidies for vulnerable sectors (agriculture and textiles). Monetary and financial sector measures included four policy rate reductions between March and July 2020 from 6.25 to 3.5 percent; an initial drop in the international reserve target by 20 percent in May 2020; the suspension of bank loan repayments for 6 months and insurance premium payments for 3 months; delayed implementation of Basel II.5 to maintain bank lending capacity, and a directive for banks not to pay dividends to shore up capital and liquidity. The Central Bank of Lesotho also encouraged banks to reduce fees on digital platforms. Going forward, financing difficulties mean that the government will need to contain and align expenditures with available resources and provide space for priority spending and high value capital expenditure.

Governance safeguards. Progress on governance commitments from the 2020 Rapid Credit Facility/Rapid Financing Instrument (RCF/RFI) remains mixed (see attached table). Only partial quarterly budget implementation reports on COVID-related spending were published in 2020 and a partial internal audit was completed. The Auditor General has reported that the full audit for FY20/21 can only be finalized by March 2022, though a transactions audit—an important input to the final audit—is expected to be published by end-September 2021. The government is also working on the online publication of COVID-19 spending-related procurement contracts. Despite important progress on public procurement legislation, other key Bills (Anti-Corruption and Public Financial Management and Accountability) are still being (re)drafted before they can be submitted to Parliament.

IMF program status. Lesotho has requested a medium-term Fund-supported program. Discussions are currently underway on macroeconomic policies and structural reforms to bring the economy back on to a path of fiscal sustainability and inclusive, resilient growth. The country already received support from the IMF’s RCF/RFI in July 2020, in an amount of SDR34.9 million (50 percent of quota).

Staff appraisal. Staff supports Lesotho’s request for debt relief under the CCRT. Lesotho meets the income threshold with GNI per capita of US$1,100, below the threshold of US$1,205, and staff assesses that it faces exceptional BoP needs stemming from the impact of COVID-19 and is pursuing appropriate macroeconomic policies to address the difficulties.

Upcoming debt service. Lesotho has debt service of SDR 3.8 million falling due in the period of debt service relief from October 8, 2021, to April 13, 2022.

Table 1.

Lesotho: Selected Economic Indicators, 2018/19–2026/271

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Sources: Lesotho authorities, World Bank, and IMF staff calculations.

The fiscal year runs from April 1 to March 31.

IMF Information Notice System trade-weighted; end of period.

12-month time deposits rate.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Table 2.

Lesotho: Balance of Payments, 2018/19–2026/271

(US$ millions, unless otherwise indicated)

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Sources: Lesotho authorities and IMF staff calculations.

The fiscal year runs from April 1 to March 31.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Table 3.

Lesotho: Debt Service due to the IMF Over the Period From October 8, 2021 Through April 13, 2022

As of July 31, 2021 (in SDR)

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Table 4.

Lesotho: Implementation Status of Governance/Transparency Measures Under the RCF/RFI

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Source: Lesotho authorities.

Annex IV. Kingdom of Lesotho: Letter of Intent—CCRT Request

Ministry of Finance

P.O. Box 395

Maseru 100, Lesotho

September 17,2021

Ms. Kristalina Georgieva

Managing Director

International Monetary Fund

Washington, D.C. 20431

Dear Ms. Georgieva,

The COVID-19 pandemic is having severe effects on both the health situation and prospects of the general public and on the level of economic activity across the globe.

We in Lesotho are experiencing an exceptional balance of payments need arising from the pandemic and our response to it, as detailed below. More generally, we are suffering severe shocks in the area of public health and on economic activity:

  • Since June 2021, the country has been subject to a third wave of the pandemic with confirmed cases of the delta variant. As of September 9, 2021, there have been 15,145 confirmed cases and 532 recorded deaths, and underreporting is believed to be significant. Despite our efforts, the vaccination program is still in its early stages with 216,370 doses administered as of August 28, 2021 (just over 10 percent of the population).

  • We currently anticipate that: i) real output will grow by 2.8 percentage points in FY21/22, compared with pre-crisis projections of 3.7 percent growth; ii) the impact on the budget of rising health support, economic lifelines, and an urgent need for macroeconomic adjustment will precipitate an emerging balance of payments (BoP) need to the order of US$143 million (6 percent of GDP and 17.6 percent of our projected end-2021 official external reserves). The BoP need estimate already takes into account the recently approved SDR allocation, which we intend to use to boost international reserves and provide short-term budget support, as needed.

Our response to the crisis has had several dimensions:

  • We implemented nonpharmaceutical containment measures early on, including social distancing, travel restrictions, border closures, school closures, and suspension of business activity. The first lockdown was lifted on May 19, 2020, but by end-December 2020, the country experienced a significant surge in cases and a second lockdown went into effect for two weeks from January 15 to February 3, 2021. Curfews have remained in place, and during the current third wave, the national COVID alert level was raised back to its third highest level on July 22, 2021.We also reinstated restrictions on activities and international travel. We spent around LSL1.2 billion (3.8 percent of GDP) on economic and social mitigation measures to cushion the impact of the pandemic on households and businesses. These measures included the expansion of existing social transfers to the most vulnerable parts of the population (for example, through the child grants and public assistance programs); the provision of food parcels and stamps; salary subsidies for textile industry workers; and sector-specific grants to SMEs.

  • We switched to the use of cash warrants to contain public spending and preserve vital room for COVID-related expenditures. Tax payments were also deferred. We implemented several monetary and financial measures. Our monetary policy rate was reduced from 6.25 to 3.5 percent (275bp) between March and July 2020 and has been kept at this level since then. Insurance companies’ premium payments were suspended for 3 months, banks were instructed not to pay dividends to shore up capital and liquidity, and we paused Basel II.5 implementation temporarily to help banks maintain their lending capacity. We remain committed to the exchange rate peg and to this end, the Central Bank of Lesotho has continued to set reserve targets appropriately. As such, we increased the target floor for net international reserves by US$150 million to US$780 million on July 27, 2021.

Against this backdrop and given the extraordinary BoP need created by the impact of the coronavirus, we hereby request grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT) to cover our debt service to the IMF falling due in the period from October 8, 2021 to April 13, 2022, or as much as is available from resources. This debt relief will free up budgetary resources to address public health needs and support economic activity in key sectors; it will also help contain the BoP need resulting from the pandemic.

We received support from the IMF’s Rapid Credit Facility/Rapid Financing Instrument in July 2020, amounting to SDR 34.9 million (50 percent of quota). We also reaffirm our commitment to the governance commitments on the publication of key audits and COVID-related procurement made under this arrangement and continue to work to enhance governance and transparency. We are also working closely with IMF staff to put together a new medium-term Fund-supported program that will help tackle our protracted BoP problem caused by secular economic decline, a lack of competitiveness, volatile SACU revenues, and an oversized public sector with a large wage bill. These factors are constraining our ability to combat the pandemic, limit economic scarring, reduce vulnerability to climate shocks, address underlying inequalities, and protect the exchange rate peg. We are confident that strong IMF support for our country will reinforce our efforts to tackle the pandemic, advance reform momentum in line with our development priorities, and catalyze wider support from development partners and private investment.

We authorize the IMF to publish this letter and all staff Board documents related to this request for debt relief from the CCRT.

Sincerely yours,

/s/

Hon. Thabo Sophonea (MP)

Minister of Finance

Annex V. Benin: Update for CCRT Debt Relief

Recent economic developments. The COVID-19 pandemic, coupled with subdued land trade with Nigeria1, continues to adversely impact the Beninese economy. Growth is projected at around 5.5 percent in 2021 (compared to 3.8 percent in 2020), still short of the pre-COVID forecast of 6.7 percent. This rebound is expected to be driven by a recovery in trade, and transport sectors, in addition to robust agricultural exports and public investment. Recent spikes in food prices (which have increased by nearly 14 percent since the beginning of the year) could jeopardize the recent slight declines in still high poverty rate2—from 45.6 percent in 2019 to 45.1 percent in 2021.3 Public finances continue to be under pressure from COVID-19-related spending needs and a weakened revenue base. The overall fiscal deficit is projected at 4.5 percent of GDP in 2021 (compared to 4.7 percent of GDP in 2020), due to the steady implementation of public investments, and is expected to gradually converge towards the WAEMU’s 3 percent of GDP criterion by 2023. The Eurobond issuances in January (EUR 1 billion, 7 percent of GDP) and July 2021 (EUR 500 million, 3.3 percent of GDP) will amply ensure the financing of the fiscal deficit as well as the accumulation of government deposits. The current account deficit is projected to widen in the medium term owing to an increase in imports and a decrease in budgetary grants. Total public debt is projected to increase to around 52 percent of GDP at end-2021 (from 46.1 percent of GDP at end- 2020).

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).

Source: Beninese authorities; and IMF staff estimates and projections

Public health and macroeconomic policies. A third wave of the pandemic hit Benin in late July 2021, with the number of new daily confirmed cases reaching a weekly record of 2,309 cases by end-August 2021. While a nation-wide vaccination campaign was launched in end-March 2021, the vaccine rollout has been slow4—less than 1 percent of total population received at least one vaccine dose as of August 31, 2021—indicating deployment challenges and vaccination hesitancy. To contain the current wave and entice more vaccination, the authorities have recently suspended large events, increased the mobile vaccination teams, and diversified vaccine offerings. Some public entities have also made vaccination mandatory for their employees. The authorities are maintaining a robust COVID-19 response in 2021, while spending on education, health and social protection is expected to increase to 5.6 percent of GDP in 2021 (or US$1 billion) compared to 5.5 percent in 2020 (US$0.8 billion) and 4.3 percent in 2019 (US$0.6 billion). Benin has benefited from the 1st, 2nd, and 3rd tranche of the CCRT covering the period between April 14, 2020 and October 13, 2021 for an amount of SDR 19.11 million (CFAF 15 billion), representing about 4.6 percent of its COVID-19 response plan.

Governance safeguards. In their latest Letter of Intent5, the authorities reiterated their commitments to ensure transparency and accountability in the management of COVID-19-related expenditures. Since December 2020, they have been publishing, monthly, procurement documents online and key information related to contracts above CFAF 10 million implemented under the COVID-19 response plan; the names of the beneficial owners of the awarded companies; and the ex-post validation of delivery. A new legal framework for the transformation of the Audit Chamber into a supreme audit institution has been enacted to comply with WAEMU directives. This has delayed the publication of the independent audit of the use and effectiveness of the committed Covid-related funds.6 Following the recommendations of an IMF fiscal transparency mission in July 2021, the authorities have committed to further improving the public financial management system and enhancing fiscal transparency.

IMF support status. Benin’s three-year arrangement under the Extended Credit Facility (ECF) concluded on July 31, 2020. The completion of the sixth and final review under the arrangement enabled the disbursement of SDR 91.931 million (about US$125 million), of which SDR 73.013 million (US$103.3 million) were due to an augmentation of access by 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 expressed interest in a new Fund-supported program, whose focus and timeline will be discussed at the time of the forthcoming Article IV mission.

Upcoming debt service. Benin has debt service of SDR 2.122 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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, and the emergency financing under the RCF/RFI are being used to help provide emergency health, social and economic support to the economy, and to speed up the economic recovery.

Table 1.

Benin: Selected Economic and Financial Indicators, 2019–26

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

Includes re-exports and imports for re-export.

In 2021, the increase in the overall balance of payments reflects the issuance of January and July 2021 Eurobonds.

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).

2021 Regional Consultations, Country Report (No. 21/49). Pre-Covid19 figures referto 2019 Regional Consultations, Country Report (No. 19/90).

Excluding intraregional trade.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex VI. Burkina Faso: Update for CCRT Debt Relief

Recent economic developments. New COVID-19 cases remain low, while the security situation is still concerning, with an uptick of attacks in recent months. COVID-19 vaccination started in June 2021, and the authorities have requested donors’ support to bridge the financing gap for vaccinating the population (60 percent of the targeted population by 2022). As of end-August 2021, Burkina Faso had secured about 8.53 million of courses of vaccine supply that are expected to cover for about 41 percent of the population (COVID-19 vaccine tracker). Economic activities continued to recover since the third quarter of 2020. Consequently, real GDP growth is now estimated at 1.9 percent in 2020 (compared to 2 percent contraction projected earlier and the 5.5 percent pre-COVID-19 projection), and is expected to rebound to about 6.7 percent in 2021 (compared to 5.7 percent pre-COVID-19 projection). Higher prices of imported goods and upward adjustment of fuel pump prices have pushed inflation up to 3 percent at end-May 2021, but inflation is projected to decline to 2.7 percent by year-end. On the fiscal front, the overall deficit widened to 5.7 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 the GDP decline and additional borrowing to finance the COVID-19 response.

Burkina Faso: COVID Related Fiscal Measures1

(Percent of GDP, unless otherwise indicated)

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Sources: Burkinabe authorities and Fund staff estimates

Most recent projection before March 1, 2020.

Source: Burkina Faso authorities; and IMF staff estimates and projections

Public health and macroeconomic policy response. The higher fiscal deficit was financed through policy adjustment and substantial external resources, including debt relief under the CCRT, and program and rapid access disbursements from the Fund. Relative to pre-COVID projections, priority spending is estimated to have increased by 1.0 percent of GDP in 2020 and other COVID-19-related spending by 2.4 percent of GDP. These increases were partially accommodated by keeping the wage bill unchanged, cancelling some non-priority spending on goods and services, and reducing current transfers. The authorities also postponed important but non-urgent public investments to accommodate new COVID 19-related health investments and security spending (Country Report No.2020/304). The COVID 19-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. Priority spending is projected to increase by 0.6 percent of GDP in 2021, owing to 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, 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.

Governance safeguards. All COVID-19-related support was channeled through the revised 2020 budget as well as the 2021 budget. An audit of COVID-19 related spending up to December 2020 was published in June 20211. The audit 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 addressing 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.

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 stands at SDR 256.58 million (213.11 percent of quota) as of August 31, 2021. The authorities have adopted a new national development plan for 2021–2025 to guide post-COVID-19 recovery, resilience building, development policies and reforms, and negotiations are underway for a new financial arrangement with the Fund to support these reform efforts.

Upcoming CCRT eligible debt service. Burkina Faso has debt service of SDR 10.61 million falling due during October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 three 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, 2018–23

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

Percent of beginning-of-period broad money.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex VII. Burundi: Update for CCRT Debt Relief

Recent economic developments. The number of new COVID cases is rising fast since January 2021. New cases increased from an average of 20 cases per week in 2020 to an average of 340 cases per week during January-August 2021, with more than a thousand cases per week from mid-July to end-August The impact of the COVID-19 pandemic on economic activities is broadly in line with the assessment made during the third 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 percent in 2020. Lockdown measures in trading partner 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 and increase in exports during H2 of 2021, growth in 2021 could reach about 1.6 percent.

  • The current account deficit is expected to worsen in 2021, despite the projected exports recovery, mainly because of a large increase in COVID-related imports and imports of intermediate goods. Notwithstanding the recent SDR allocation, the level of foreign exchange reserves would remain precarious (2.5 months of imports) without additional external support.

  • Despite good revenue performance, the fiscal deficit reached 6.9 percent of GDP in 2020/21 (July 2020-June 2021, i.e., FY2021), well above the budget target of 2.5 percent of GDP, mainly because of COVID-related spending and the transition to the new administration. This deficit was mainly financed with higher-than-expected domestic debt issuance. COVID-related spending is expected to push the fiscal deficit in 2021/22 well above the budget target of 2.3 percent of GDP.

  • 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 prices 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 reopened on November 8, 2020. Testing is mandatory for all international travelers, but quarantine requirements have been lifted for them. The authorities’ ongoing pandemic response plan (estimated at US$150 million or 4.7 percent of GDP) focuses on strengthening the health care system, 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 authorities are still collecting data on the implementation of their pandemic response plan, which only accelerated from the second half of 2020 ( FY2021). Staff estimates that COVID-related spending amounted to about 0.8 percent of GDP in 2020/21 and could reach 3.3 percent of GDP in 2021/22 if the expected financing (including from the IMF) materializes. The plan’s implementation continues however to be impeded by limited availability of financing beyond a grant from the World Bank (US$5 million) and the first three 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 and 2021. 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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Most recent projection before March 1, 2020.

Source: Burundi authorities; and IMF 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. The authorities are preparing reports on COVID-related spending, which will be audited by the Court of Auditors and published on the government’s website within nine months of the end of FY 2021 (i.e., before end-March 2022). In July 2021, they also committed to preparing timely bi-annual reports on COVID spending that will be audited by the Court of Auditors and will be published within three months of the end of each semester. The authorities also committed to collecting information on the ultimate beneficiary ownership of companies that will be awarded COVID-related contracts moving forward.

IMF support status. The authorities have requested financial assistance to support their efforts to respond to the COVID crisis. Fund financial support in March and October 2020 and April 2021 entailed three tranches of debt relief under the CCRT (totaling SDR 14.46 million or 9.4 percent of quota). In August 2021, Burundi received an SDR allocation amounting to SDR 147.6 million (US$ 211 million or 6.6 percent of GDP). Burundi’s international engagement has been limited and currently there is no Fund-supported program. During a recent virtual mission (June 23-July 26, 2021), the authorities and staff agreed on policies that could be supported by a disbursement of SDR 53.9 million (about US$ 78 million) under the Rapid Credit Facility (RCF) to address the economic and social impacts of the COVID pandemic. This staff level agreement is subject to IMF management approval and Executive Board consideration. 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.

Upcoming debt service. Burundi does not have debt service falling due to the Fund during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 three 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.

Table 1.

Burundi: Selected Economic Indicators, 2019–26

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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). Includes Covfd related fiscal measures starting in FY2D2Q/21.

CCRT debt relief for the period from January 11, 2022 through April “3. 2C22 is included in projections, but its approval is subject to the adequate resources under the CCRT.

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

Recent Economic Developments. After seeming to be contained in the second half of 2020, the incidence of the pandemic grew rapidly during the Spring of 2021 before returning to a very low level, possibly reflecting seasonal factors and lower testing. The authorities launched their vaccination campaign in May and are finalizing their vaccination strategy, which aims at vaccinating 60 percent of the population in 2022 with the financial assistance of their development partners. Only 7 percent of adults are fully vaccinated as of August 24, 2021. Though the Covid-19 pandemic had a substantial impact on services such as commerce, transportation, tourism, and hospitality, this impact was smaller than initially envisaged, with growth estimated at 1 percent in 2020 compared to 0 percent projected shortly after the pandemic hit. However, the growth projection for 2021 has been revised significantly downward (from 3½ to – 1 percent) owing mostly to the deterioration of the security situation and the closure of the trade corridor between Bangui and Douala during the first few months of the year. A sharp decline in exports (from lower external demand and closure of the corridor), along with lower financial flows, are expected to have contributed to a significant increase in external and fiscal financing needs in 2021, which are expected to be covered by part of the general SDR allocation. Reflecting lower domestic revenue and a lower nominal GDP, the domestic primary fiscal deficit is expected to exceed 5.5 percent in 2021, compared with 4 percent projected at the end of 2020. Consequently, public debt is projected to increase from 44.1 percent of GDP at end-2020 to 46.5 percent of GDP at end-2021. The Covid-19 pandemic and the security crisis have exacerbated the humanitarian situation, with the World Bank estimating that 70 percent of Central Africans live below the international poverty line, while the numbers of refugees and internally displaced persons have both increased to close to 700,000 at end-July.

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 2.8 percent of GDP, compared to 2.0 percent of GDP before the pandemic. Other Covid-related spending excluding health expenditure amounted to 1.1 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 continue the implementation of the health response plan in 2021, with priority expenditures amounting to 2.5 percent of GDP, of which 1.3 percent of GDP will be spent on health. Other Covid-related expenditures represent 0.7 percent of GDP in the 2021 revised budget law.

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 ECF arrangement and the discussions around a possible SMP, 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 (here) an initial list of nine (9) COVID-19-related procurement contracts approved between August 14, 2020, and November 17, 2020. In addition, on July 12, 2021, they also published (here) a list of nineteen (19) contracts approved in the first half of 2021. While this list includes observations on the criteria for selection of the awardees, it does not include the beneficial ownership information of firms awarded these procurement contracts The Court of auditors conducted an independent audit of 2020 Covid-related expenditures and the report was published (here) on August 26,2021 on the ministry of finance’s website. Yet, the audit report has identified several irregularities in Covid-related expenditures such as the excessive recourse to direct procurement arrangements. Finally, the ministry of finance continued to publish quarterly expenditure execution reports (here).

Central African Republic: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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If available, latest MT projection before March 1, 2020

Source: Central African Republic authorities; and IMF staff estimates and projections

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 approved on April 20, 2020. On January 12, 2021, the Executive Board completed the first and second reviews under the ECF arrangement, which enabled the disbursement of SDR 23.87 million (21.4 percent of quota). With the existing ECF- supported program off- track, discussions on a 7-month Staff Monitored Program (SMP) have advanced.

Upcoming debt service. CAR has debt service of SDR 1.532 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. As discussed in the public health and governance paragraphs above, Staff assesses that the CAR authorities have sought to pursue sound macroeconomic policies since the onset of the pandemic, against the backdrop of a difficult security situation. While the ECF-supported program went off-track in late 2020, with the government significantly overspending and delays in implementation of structural reforms, the authorities have since requested an SMP to establish a track record of policy implementation that could pave the way for a renewed IMF financial arrangement and help catalyze needed donor support. Staff also assesses that the resources freed by the first, second and third tranches of Fund debt service relief under the CCRT, and other support from the Fund, have helped the authorities 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, 2019–26

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Sources: CAR. 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.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex IX. Chad: Update for CCRT Debt Relief

Recent economic developments. Byproducts of major shocks in 2020—the COVID-19 pandemic, the drop in oil prices, heightened insecurity, and floods—continue to severely strain Chad’s vulnerable economy. As a result, non-oil GDP is expected to remain flat in 2021, due to a more protracted recovery while oil GDP is expected to grow by 4.4 percent. Inflation is expected to weaken to 2.6 percent during the same period, given the slower recovery. Chad is also facing a liquidity squeeze, hampering its ability to adequately conduct fiscal policy towards anti-COVID measures and social spending. The recent SDR allocation (of about US$191 m) will help increase regional reserve buffers while providing the needed fiscal space for vaccine rollout, priority spending, and measures to support economic recovery. The first half of 2021 witnessed significant political events with the death of President Deby, which was followed by the formation of a transitional government. Chad scores very low 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. In the first half of 2021, priority spending were estimated at 25.5 percent of total spending, an increase compared to FY2020, but it is expected to remain below the pre-Covid level for the whole year, mainly because of some covid related expenditures that were phased out during 2021, and expenditures (other than priority spending) including capital spending that are expected to increase following the approval of the IMF program by the board.[] Moreover other measures in FY21 to fight Covid – 19 were hindered by the liquidity squeeze in government finances. At the same time, tax advantages were introduced in 2021 that include exemptions 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 GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Source: Chad authorities; and IMF staff estimates and projections

Governance Safeguards. Chad faces governance and corruption vulnerabilities. The government is taking steps to ensure transparency in the use of COVID-19 resources consistent with commitments made under the second RCF disbursement. Resources dedicated to combatting COVID-19 will be used in full transparency. In addition to being reflected in the budget law, resources will be committed in line with 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, including analysis of compliance with procedures with regards to regulated agreements, will be published within a month of completion on the Ministry of Finance and Budget’s website. This was expected to be published in July 2021 but there are delays following the death of the President in April and the formation of a transition government. In addition, the authorities will continue publishing on-line the full text of all COVID-19-related procurement contracts, (link: Republique du TCHAD – Ministere des Finances et du Budget – MARCHES SPECIAUX COVID 19 (gouv.td). The procurement system currently doesn’t identify beneficial owners of awarded legal persons. The authorities could benefit from strengthening transparency in public procurement, particularly to enhance the framework for identifying the beneficial owners, with the help of IMF technical assistance. They are also expected to publish on-line the ex-posf-delivery reports for goods and services, including the lists of suppliers and contractors, for all such contracts starting October 2021.

IMF engagement. On January 27th, IMF staff reached a staff-level agreement with the Chadian Authorities on a new medium-term program that could be supported by IMF resources of about $573 million under the Extended Credit Facility (ECF). Despite the fiscal adjustment and structural reforms incorporated in the new program, Chad’s debt is assessed to be unsustainable, and the authorities have requested a debt workout under the Common Framework. Chad has already received financing assurances in mid-June from official bilateral creditors, but it has yet to receive similar assurances from its main private creditor.

Upcoming debt service. Chad has debt service of SDR 4.062 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. There is no debt service falling due during the remaining period from January 11, 2022 to April 13, 2022.

Staff assessment. Staff assesses that Chad is pursuing appropriate macroeconomic policies to address the global pandemic and urged the authorities to continue undertaking steps to ensure transparency in use of Covid-19 resources Staff also assesses that the resources freed by the first, second, and third 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.

Table 1.

Chad: Selected Economic and Financial Indicators, 2019–24

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

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.

The CEMAC reference fiscal balance is calculated as the overall fiscal balance minus the savings from oil revenue, which is the sum of 20 percent of oil revenue of the current year and 80 percent of the oil revenue in excess of the average oil revenues in the previous three years.

Annex X. 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 COVID casualties has remained low (by mid-August 2021, there was a cumulative total of 4,035 officially recorded infections and 147 deaths in a population of 850,000), the economy contracted by 0.5 percent in 2020 (compared with projections of 4.4 percent growth pre-COVID). 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 slightly and grants, while more than expected, came late in the year. Government expenditure shrank noticeably due to weak capital expenditure owing in part to capacity limitations and delays in grants. Accordingly, the fiscal cash deficit was lower than anticipated, reaching 0.8 percent of GDP (versus pre-COVID projections of 2.2 percent of GDP), and the debt burden rose by less than expected (debt data revisions also contributed).1 Exports fell by almost half and imports declined somewhat, while strong aid and remittance inflows helped to provide a comfortable reserves buffer. In 2021, the economy is projected to grow by only 1.6 percent (compared with projections of 3.5 percent growth pre-COVID). Muted growth prospects reflect a weak start into the year due to a second wave of COVID infections, slow progress in vaccinations (only 7 percent of the population have been vaccinated so far), and an only slow return of visitors. The fiscal deficit is expected to widen to 4.2 percent of GDP (1.7 percent of GDP higher than pre-COVID projections), reflecting slightly lower revenue due to weak performance at SOEs, higher COVID-related spending (e.g., cash transfers to the poor), and higher capital investment. While the terms of trade have deteriorated due to higher prices of key imports, still higher than usual remittance inflows and the recent SDR allocation (US$ 24 million, 1.8 percent of GDP) have continued to support reserves coverage. 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. In 2020, the authorities sought to lessen the pandemic’s health impact including by imposing social distancing measures and to reduce 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 general government purposes, partially offsetting the pandemic’s impact on revenue. In 2021, the authorities cautiously eased the social distancing measures and ended the temporary tax reductions. They also plan to provide cash transfers to the poor of 1.1 percent of GDP (using part of the SDR allocation and drawing on WB project support) and hope to vaccinate a total of 35 percent of the population by the end of the year, using vaccines doses already received. Data constraints prevent a full understanding of trends in social spending (health, education, and social assistance/insurance).

Governance safeguards. In their Letter of Intent of April 2020 accompanying a request for RCF/RFI emergency financing, the authorities made several governance related commitments. Implementation has been mixed:

  • The authorities had committed to reporting quarterly on the spending of IMF emergency financing. So far, the authorities have reported to staff in early 2021.

  • The authorities had committed to commissioning an independent and robust third-party audit of the spending of IMF emergency financing by about mid-April 2021 and publishing its results. The authorities have inscribed the audit in the work plan of the government court of auditors. The audit is yet to be started.

  • The authorities had committed to publishing quarterly documentation on large public procurement projects, together with ex-post validation of delivery along with the name of awarded companies and the name of their beneficial owner(s). In July 2022, the authorities have published limited information on procurement made with the help of IMF emergency financing and related to addressing the impacts of the pandemic. The information includes a description of the goods and services that were the object of the project, the procurement procedure (direct contracting vs. call for tender), the amount of the project, and the name of the provider. In discussions with staff, the authorities have reaffirmed their intention to publish comprehensive procurement information on all large procurement projects and have requested IMF capacity building on the concept of beneficial ownership and how they can best collect and publish such information.

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 fiscal and balance of payment needs from the COVID-19 pandemic. The authorities have requested a Staff Monitored Program (SMP) to establish a track record to pave the way for an eventual ECF arrangement. The SMP request is currently under discussion.

Upcoming debt service. Comoros has debt service of SDR 638,747, which includes estimates for the GRA charges on the CCRT-eligible debt, falling due to the Fund during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 three 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 welcomes recent progress and urges the authorities to proceed as quickly as possible with the publication of an audit of the use of IMF-provided funds and the publication of information on all large procurement projects.

Table 1.

Comoros: Selected Economic and Financial Indicators, 2019–26

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

From 2017, includes budgeted-for revenues and expenses related to fuel subsidies of SOEs.

Domestic revenues minus current primary expenditures and domestically financed capital expenditures, excluding the World Bank-financed spending to combat the COVID epidemic and the cost of restructuring SNPSF.

For 2022–23, includes unmet financing needs for restructuring SNPSF

From 201 5, net private official transfers include estimates made by the Central Bank of Comoros of debit items other than wire transfers.

From 2021, includes new SDR allocation of $24 million.

Coverage of debt: The central government, the central bank and government-guaranteed debt. Definition of external debt is Residency-based.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XI. 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 the Congo (DRC), mostly due to containment measures. Between May and August 2021, the country has seen an increase in the number of COVID-19 cases (45% of the country’s 54,863 cumulative cases at the end of August were recorded during that period); authorities responded by increasing containment measures which curbed the number of new cases since end-August There is widespread skepticism about vaccines, only 0.1% of the population have received are even partially vaccinated. The brunt of the pandemic was particularly felt in the services sector, with the retail and manufacturing sector also affected. 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 grown by 1.7 percent in 2020 and is expected to expand by 4.9 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 1.3 percent in 2020, due to the impact of containment measures on the services sector. In 2020, the pandemic led to combined losses in revenue and grants of 2.9 percent of GDP relative to the pre-COVID projection while increased spending for pandemic-related and education purposes was offset by spending reductions in other areas, leading to a fiscal deficit of 2.1 percent of GDP in 2020 (compared to a pre-COVID projection at the time of the SMP of 0.6 percent of GDP). DRC’s fiscal deficit was 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. For 2021, the projected fiscal deficit is 1.7 percent of GDP. Public debt projections have not been significantly affected by the pandemic. In 2020, nominal exports grew by 4.6 percent thanks to booming mining exports, more than a pre-COVID projection of a 5.4 percent decline; nominal imports shrank by 8.3 percent against a pre-COVID projection of 0.1 percent growth, which is explained by lower capital goods imports. Despite a drop in remittances, the current account deficit was therefore significantly smaller than expected at 2.2 percent of GDP (including transfers), relative to 4.3 percent pre-COVID. The balance of payments financing gap was US$433 million in 2020 and rose to US$798 million in 2021, or 0.9 and 1.5 percent of GDP respectively. 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. In 2020, US$52 million have been identified as COVID19-related spending. Detailed information has been provided, including spending by the Inter-ministerial Committee to Fight against COVID-19, contributions for GAVI’s vaccination campaigns (US$16 million), and about US$10 million spent by the Ministry of Health. Other spending includes wages and payments undertaken under emergency spending procedures (some with no procurement process), and some regular spending redirected for COVID-19 purposes (mostly in security, sanitation, and transport sectors) for which information is not yet available due to limited capacity. In addition, the Ministry of Health published detailed information on spending by categories, and by provinces, including their beneficiaries. Regarding specific COVID19-related spending committed and executed by external donors, the Ministry of Health published a note with details of this spending which amounts to more than US$200 million in commitments and US$116 million executed by end-April 2021. Budgetary health spending is projected to increase by 0.1 percent in 2021. The government continues with the implementation of its free education initiative despite financing constraints. IMF financing, other donors’ support, and debt relief have covered government revenue losses associated with the pandemic and helped rebuild external buffers.

Democratic Republic of the Congo: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Source: Congolese authorities; and IMF staff estimates and projections

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.1 Under the ECF arrangement, the authorities have committed to reinforce the expenditure chain by producing quarterly reports detailing the nature and amount of each procedure. These quarterly reports will then be reconciled with the treasury plan and the BCC notices, with publication starting by end-2021. 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. By June 23rd, 2021, the authorities have published 32 contracts, totaling US$6.8 million, including one contract above one million with the name of the supplier but not the one of its beneficial owners. The General Finance Inspectorate is undertaking an audit of COVID-19 related expenditures. Additionally, the annual report of the Audit court will include a special audit on COVID-19 related expenditures, which authorities have committed to publish after its presentation to Parliament in September 2021.

IMF support status. On July 15, 2021, the Executive Board of the International Monetary Fund (IMF) approved a 3-year arrangement under the Extended Credit Facility (ECF) for the Democratic Republic of the Congo in an amount equivalent to SDR1,066 million (100 percent of quota or about US$1.52 billion). The ECF arrangement will support the authorities’ medium-term reform program aimed at maintaining macroeconomic stability, increasing fiscal space, and promoting a sustainable and private sector-led economic growth. Under the terms of the August 2021 general SDR allocation, the country received 95.8 percent of the quota (equivalent to US$ 1.46 billion). The use of the SDR allocation will be discussed with the authorities during the first review under the ECF arrangement.

Upcoming debt service. DRC does not have debt service to the Fund falling due during the interval from October 16, 2021 to April 13, 2022.

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 in 2020, while budget execution has been aligned to available funding and has discontinued recourse to central bank advances. Preliminary data would support the view that resources freed by the first three 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 population.

Table 1.

Democratic Republic of the Congo: Selected Economic and Financial Indicators, 2019–26

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

Annex XII. Djibouti: Update for CCRT Debt Relief

Recent Economic Developments. Djibouti has endured two, relatively brief, waves of the COVID-19 pandemic. Following the first surge in cases in May 2020, the authorities successfully contained the spread of the virus through strict containment measures, including restrictions on local mobility and international travel. The second wave of infections in early 2021 was contained without significant confinement measures. The authorities have since launched a vaccination campaign, but have so far vaccinated under 4 percent of the population due to vaccine hesitancy. The pandemic has affected economic activity, largely through a slowdown in port traffic and investment, with growth slowing to 1 percent in 2020. External support helped to cushion the impact on macroeconomic stability. Nevertheless, lower growth has resulted in higher debt ratios. Assuming the virus remains contained, Djibouti is set to recover in 2021 with growth projected at 5 percent, consistent with the rebound in regional partners and global trade. Modest additional fiscal support in 2021 will reinforce the recovery, but the outlook remains highly dependent on the evolution of the virus and regional developments, 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 supported the economy in 2020 through a supplementary budget with 2.1 percent of GDP in COVID-related expenditures, including job protection measures, cash transfers, deferral of social and corporate tax contributions, and deferral of loan repayments. With the economic recovery underway, the authorities have maintained modest COVID-related spending of 0.6 percent of GDP to support households and businesses in 2021. Support under the CCRT has helped cover the costs of vaccine delivery, including two mass vaccination sites. Despite ample supply and eligibility for the entire adult population, only 35,556 people, about 3.5 percent of the population, had been vaccinated as of August 25, 2021. The authorities have launched an information campaign to combat hesitancy and instituted vaccination requirements for international travel.

Djibouti: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Note: The authorities were unable to provide data on priority expenditures Source: Djibouti authorities; and IMF staff estimates and projections

Governance safeguards. COVID-related spending in 2020 and 2021 was legislated through regular budget procedures, promoting transparency in resource allocation. The authorities agreed to commission this year an external audit of COVID-related spending as part of the May 2020 RCF commitments and to publish the results. 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 a disbursement under the RCF for SDR 31.8 million (US$43.4 million, 100 percent of quota). Djibouti has benefitted from the first three tranches of the CCRT totaling SDR 4.7808 million and from the recent SDR allocation of SDR 30 million. Djibouti is also a beneficiary of the Debt Service Suspension Initiative.

Upcoming debt service. Djibouti has debt service of SDR 0.625 million, falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 three 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.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

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

Recent Economic Developments. COVID-19 continues to affect lives and livelihoods. A proactive and forceful response in 2020 led to a steady decline in cases from August to December, which allowed removal of most containment measures. However, a second surge in infections in late January 2021 led to reinstatement of some containment measures. Though cases declined after March, a third surge has taken hold since July. At the same time the progress on vaccination has been slower than expected. Though Ethiopia received 2.2 million vaccine doses through COVAX in March, supply constraints have delayed subsequent planned shipments and endanger the goal of vaccinating 20 percent of the population by the end of 2021. Real GDP growth for 2020/21 is projected at 2 percent (unchanged from 3rd CCRT tranche update), well below past trends, due to the effects of the pandemic on non-agricultural activity, locusts infestation’s adverse impact on agricultural production and domestic conflict1 Convergence to trend growth in the medium-term is expected to be slower than forecast previously and from below, as against a sharp v-shaped recovery with an overshooting in 2021/22 envisaged earlier (3rd tranche update), in light of significantly slower-than-expected vaccine rollout, emergence of more transmissible variant(s) of the virus, and limited policy space to offset the effects of the pandemic and procure and administer vaccines at a faster pace. Even so, there are further significant downside risks due to the widening of the conflict, as evidenced by recent deterioration in high frequency indicators such as inflation and the parallel market exchange rate. Moreover, the ongoing pandemic and conflict are expected to slow down or possibly reverse the declining trend of poverty over the past two decades. Fiscal policy was expected to be moderately expansionary in 2020/21, with the deficit at 3 percent of GDP (compared with 3.3 percent projected during the February staff-level agreement with the IMF), as the authorities cut or deferred other current and capital spending to accommodate COVID-related measures (mainly on additional payments to health workers, food assistance, and procurement of health equipment, amounting to 0.7 percent of GDP in 2020/21). Outturns suggest that tax revenues in 2020/21 are expected to be in line with the budget, but much lower than in the pre-COVID projections. In 2020/21, the current account balance improved significantly, compared to 2019/20, due to a turnaround in private transfers while foreign direct investment increased. However, net repayment of loans by SOEs and lower donor support resulted in lower reserves.

Debt relief helped in supporting public health and macroeconomic policy responses. In 2019/20, the authorities allocated 1.6 percent of GDP to combat the COVID-19 pandemic, comprising healthcare, emergency food distribution and sanitation, and social welfare support2 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. For 2020/21, the authorities continued to provide fiscal support for pandemic related spending and humanitarian assistance (about 0.8 percent of GDP)3, although the detailed decomposition is not available. As noted above, the government also initiated the vaccination program, supported by the World Bank under the COVAX initiative. Given tight budget constraints amid shortfalls in external financing and the expected increase in conflict-related outlays, there are significant risks that COVID-related and other social/priority spending would be crowded out.

Governance safeguards. Tenders for public contracts (primarily for healthcare supplies, personal protective equipment, and humanitarian support goods) have been carried out through a competitive bidding process, in accordance with national procurement law, and bidding documents and outcomes are published online.4 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 FY2019/20is underway and now expected to be published online by December 2021 (previously expected in September 2021) due to capacity constraints.

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 (SDR 2.1 billion or about US$2.9 billion), 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 (about US$12 million) were approved by

Ethiopia: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Pre-COVID19 projections for FY2019/20 were based on original FY19/20 budget by the authorities. Projections for FY2020/21 refer to levels at IMF 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.

Source: Ethiopian authorities; and IMF staff estimates and projections the Board on April 30, 2020 along with a reduction in EFF access by 50 percent of quota to comply with then applicable annual access limit policies. Though the ECF arrangement of the ECF-EFF program expired on September 19, due to the non-completion of reviews since program approval amid a lack of financing assurances through the Common Framework, the EFF remains operational. On August 23, 2021 Ethiopia received $410 million as part of the general allocation of SDRs approved by the IMF Board of Governors.

Upcoming debt service to the IMF. Ethiopia has eligible debt service estimated at SDR 239,658 in the form of GRA charges falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 fiscal space freed by the first three 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.

Ethiopia: Selected Economic and Financial Indicators, 2018/19–2020/21 1, 2

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Sources: Ethiopian authorities and IMF staff estimates and projections.

Data pertain to Ethiopian fiscal year from July 8 to July 7.

Projections for FY2022–26 are omitted due to an unusually high degree of uncertainty.

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 (N BE).

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 XIV. The Gambia: Update for CCRT Debt Relief

Recent Economic Developments. Due to the continued impacts of COVID-19 on economic activity, including on the tourism sector, real GDP declined by 0.2 percent in 2020. Some signs of recovery have emerged in late 2020 and early 2021 but they are less vigorous than anticipated as the country has experienced a third wave of the pandemic in recent months. The latter, combined with surges in other countries, is delaying the full resumption of tourism activities and continues to hinder trade volumes and revenue collection. Nonetheless, the authorities are making strong efforts to manage prudently the budget by controlling the pace of expenditure execution. The fiscal deficit at end-June 2021, at 2.3 percent of GDP, was stronger than anticipated. Delays in budget support disbursements from development partners will weigh on fiscal performance in the second half of 2021. Exports remained weak in early 2021 and imports were persistently high, suggesting deterioration in the trade deficit. However, remittances have remained strong; during January-July 2021, they amounted to about 80 percent of full-year inflows seen in 2020. Thus, gross reserves have steadily risen, to around US$ 430 million in August 2021, and combined with the SDR general allocation (US$85 million), are expected to exceed 5 months of prospective imports at end-2021. As of early September, about 10 percent of the population has received at least one dose of covid vaccines, supported by COVAX initiative and other development partners.

Public health and macroeconomic policies. The authorities’ response continues to focus on (i) containment and mitigation measures; (ii) upgrading of the health system to strengthen first response and ensure social distancing; (iii) support to vulnerable households; and (iv) support to businesses, especially in the tourism sector. Policy measures have included purchases of health supplies, health emergency plan, food distribution, social safety net program, and temporary tax relief for some key economic sectors. These measures were financed through the authorities’ own resources, IMF RCF disbursement, World Bank grant, and other resources. The authorities approved a special appropriation in July 2021, fully financed from one-off oil prospecting penalties, which included ambulance purchases. Priority expenditures were boosted in 2020 and 2021 to help fend off the economic and social effects of the pandemic. Staff estimates priority expenditures at 5.0 percent of GDP in 2021, including health spending of 3.6 percent of GDP, especially for vaccine purchases and distribution.

The Gambia: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Based on budget numbers

Preliminary estimates

Source: the Gambian authorities; and IMF staff estimates and projections

Governance safeguards. The authorities opened a dedicated account for COVID-19-related spending in 2020 and set up a committee comprising all actors involved in the budget execution process to execute the COVID-19 spending. All COVID-19-related spending items are included in and approved through supplementary budget appropriations to comply with the budgetary process and ensure transparency. The Ministry of Finance continues to publish monthly expenditure reports, but work is needed to track COVID-19-related spending on a running basis given that this spending is no longer being exclusively channeled through a TSA sub-account The authorities committed to an independent ex-post audit of COVID spending and strengthened the internal audit at the health ministry. Consistent with their commitment, the authorities continued the publication on the Gambia Public Procurement Agency website (GPPA) of the list of all COVID-19-related procurement contracts and their beneficiary owners from March 2020 to June 2021. The National Audit Office (NAO) has completed the first phase of the ex-post audit on COVID-19-related spending and the second phase of the audit, covering the last few months of 2020, is at an advanced stage. Instead of publishing the first phase of audit separately (previously planned for September 2021), the NAO now plans to publish jointly the reports from both phases of audits in late 2021 or early 2022. 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). It 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) and an augmentation of the ECF arrangement in the context of the first review in January 2021 to SDR 55 million (88.4 percent of quota). The second ECF review was completed in May 2021.

Upcoming debt service. The Gambia has debt service of SDR 1.089 million falling due to the IMF during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. Staff assesses that The Gambia is pursuing appropriate macroeconomic policies to address the immediate impact of the global pandemic. Staff also assesses that the resources freed by the 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 mitigate the impact of the pandemic on life and livelihood of the population and support the post-pandemic economic recovery.

Table 1.

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

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

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XV. Guinea: Update for CCRT Debt Relief

Recent Economic Developments.1 COVID-19 continues to negatively impact Guinea’s non-mining sector—which accounts for over ¾ of GDP and employs the vast majority of the population. Measures imposed by the government at the onset of the pandemic to contain the spread of the virus, as well as weakened external demand, adversely affected sectors such as retail trade, transport, and tourism in 2020. Furthermore, the health measures had to be recalibrated to curb the spread of a third wave in August 2021, with prevalence of the delta variant and a sharp increase in positivity rate (from 2 in May to 9 percent in mid-August). The pandemic also exacerbated poverty and inequality levels. World Bank survey data point to higher unemployment, reduced access to health and education services, and an increase in poverty levels. Nonetheless, the mining sector, particularly bauxite and artisanal gold, was more resilient than expected. Record mining production offset the relative decline in the non-mining sector, resulting in GDP growth of 7.1 percent in 2020. However, 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 reached -2.9 percent in 2020, reflecting the response plan to the crisis and revenue shortfalls arising from COVID-induced constraints to tax collection capacity. A significant financing gap emerged during 2020—reflecting imports needed for the pandemic response and an increase in service imports as a result of an increase in digitalization and shipping disruptions amid weak FDI—and was met through 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. Guinea also faced an additional health challenge due to a new Ebola outbreak in February 2021—fortunately localized. The Guinean authorities and the WHO declared the end of the Ebola outbreak on June 19, 2021. The authorities had started vaccinating the population against COVID-19 and Ebola in March 2021. By early September, roughly 6.6 percent of the population received at least one dose of the Covid vaccine.

Growth is expected to reach 5.2 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 gradually subside. Inflation has increased to over 12 percent year-on-year in recent months, mainly driven by a spike in food prices, stemming from border closures and domestic transport disruptions, as well as higher international freight costs. The overall fiscal deficit is projected at 2.3 percent of GDP in 2021, with the budget fully financed as approved. A supplementary budget will include vaccine-related expenditure—the bulk of the vaccine procurement needs are expected to be donor financed.

The CCRT third tranche of debt service relief contributed 0.2 percent of GDP to the financing of the approved 2021 budget. Relative to 2020, the external financing gap, at about US $81 million, is estimated to be more modest in 2021, with the balance of payments supported by a strong mineral export sector and the unwinding of the pandemic support measures, expected to be covered by support from the CCRT and DSSI operations. While the June 2021 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. Preliminary discussions with the authorities indicate they will use about half of their August 2021 SDR allocation (worth SDR 205.3 bn, about 1.8 percent of GDP) to finance vaccine procurement.

  • Public health and macroeconomic policy response. The execution of the Government’s covid-response plan amounted to 1.5 percent of GDP in 2020 (Text Table). The largest share (0.9 percent of GDP) went toward the health component, with a focus on improving surveillance infrastructure, as well as purchases of medical services and equipment2 Social support measures amounted to 0.3 percent of GDP, and included the provision of food stocks and utility subsidies to households. The originally projected scale-up of cash transfers was delayed until the first quarter of 2021 due to the authorities’ inability to meet the conditions of effectiveness for receiving the World Bank funds. The remainder of the funding went to support the private sector, including through tax exemptions for health equipment, support to the hospitality sector, support for farmers and the creation of a special fund to provide financing and loan guarantees to firms, with a focus on SMEs. The 2020 execution of the response plan resulted in an over-execution of the health component by 0.2 percent of GDP and an under-execution of the social and economic support components each by 0.3 percent of GDP. The Covid-related fiscal measures in 2021 are expected to be lower than in the previous year though higher-than-expected at the time of the last CCRT report3 and amount to an overall 0.7 percent of GDP. The bulk of it is projected to be spent on health measures, notably vaccine procurement and distribution (0.5 percent of GDP), with the rest being devoted to social protection for vulnerable households (consisting of part of the cash transfers that were delayed from 2020) and support to the private sector and SOEs. Furthermore, on the monetary side the central bank lowered its policy rate and the reserve requirements to support liquidity in the banking sector. Prudential regulatory measures, which are expected to remain in place through 2021, included 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. The BCRG is closely monitoring the effects of the pandemic on the banking sector and stands ready to withdraw the support measures as the pandemic recedes.

Governance safeguards. The authorities followed through on RCF-related governance commitments. 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, covering spending through July 2021. The inspectorate-general for finance conducted an ex-post control of high-risk expenditures for Phase 1 of the Response Plan, with the involvement of civil society (available here). The report on Phase II is not yet available. The authorities also published all awarded procurement contracts for COVID-19- related projects, including the names of entities and their beneficial owners (available here). The authorities could further strengthen transparency of awarded contracts by ensuring more frequent publication of information of awarded contracts. Finally, the Court of Accounts conducted an audit of COVID-19 spending albeit with some delays due to the presence of multiple entities in the audit process. The audit, which was expected to be published online in June 2021, is now expected to be published after the Ministry of Economy and Finance conducts a review of the report.

Guinea: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Government periphery is central government.

Most recent projection before March 1, 2020.

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

Source: Guinean authorities; and IMF staff estimates and projections

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 ECF arrangement, combining the fifth and six review, and providing a disbursement of the equivalent of SDR 34.43 million. The 2021 Article IV consultation was concluded in June 2021.

Upcoming debt service. Guinea has debt service of SDR 1.836 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 monthsofthe following year’s imports excluding imports for large foreign-financed mining projects.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources undertheCCRT.

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

Recent Economic Developments.1 COVID-19 continues to have a severe economic impact on Guinea-Bissau, a fragile state with long-standing economic challenges. After the economy contracted by 1.4 percent in 2020, a modest recovery by about 3.3 percent is projected for 2021, still short of the pre-COVID forecast of 5 percent. This partial rebound is expected to be driven by higher cashew exports and prices, and a more stable political situation, in which structural reforms and enhancements in the business environment are expected to help promote private investment. Fiscal consolidation efforts (2.3 percent of GDP reduction in the domestic primary deficit) are expected to lead to 4.5 percentage points (p.p.) lower but still significant overall deficit in 2021, projected at 5 percent of GDP. The current account deficit is projected at 8.5 of GDP, around the same level of 2020. Total public debt is projected at 78.4 percent of GDP, 0.9 p.p. lower than in 2020. The CCRT fourth tranche of debt service relief will contribute 0.1 percent of GDP to close 2021 financing gaps2. This outlook relies on the effectiveness of containment measures against the pandemic and increasing distribution of vaccines. 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 declared on August 7, 2021 for 30 days was much strengthened on August 27 for 2 weeks in response to the increase in cases and deaths in the country associated with a third wave.3 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 2.7 percentage points of GDP in 2021. In 2020 the 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 (3.8 percent of GDP) is 2.4 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. As of end-June, the execution of total priority expenditures reached about 50 percent of the total projected for the year. With the support of the international donor community, the authorities plan to vaccinate 1.4 million people by the end of the first quarter of 2022. 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 indicated)

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Most recent projection before March 1, 2020.

Source: Guinea-Bissau authorities; and IMF staff estimates and projections

Governance safeguards. The authorities published the 2019 IMF Report on Governance and Anti-corruption4 and implemented several of its recommendations.5 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. The audit process was originally planned to start in the first semester of 2021, however, it has not yet started and the Terms of Reference have not been finalized yet; 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 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 RCF commitments to disclose the beneficial ownership information of companies awarded COVID-19 related contracts. The authorities have indicated that they expect to implement pending RCF commitments by the end of 2021.6

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. A nine-month SMP was approved by the Managing Director on July 19, 2021 to support the government’s home-grown program of reforms aimed at stabilizing the economy, improving competitiveness, strengthening governance, and securing debt sustainability. On August 23, Guinea-Bissau received an allocation of Special Drawing Rights of SDR 27.2 million.

Upcoming debt service. Guinea-Bissau has debt service of SDR 0.596 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 three 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 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.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XVII. Haiti: Update for CCRT Debt Relief

Recent COVID and Economic Developments. There have been about 20,962 confirmed COVID-19 cases and 586 reported COVID-related deaths since the start of the pandemic in Haiti, a country of 11.7 million people. The spread of COVID has been relatively contained since the outset, although the pace of infection and death related to the Delta variant accelerated in mid-2021. The global pandemic hit Haiti’s export sector and private demand, aggravating the economic contraction related to political instability and social unrest. Real GDP is estimated to have contracted by 3.3 percent in FY2020 (ending September 30) and is expected decline by around 0.7 percent in FY2021, with activity affected more recently by political turmoil and the August 14th earthquake.1 The poverty rate at the international poverty line (US$1.90 per day) is estimated to have risen to 25.1 percent in 2020, up from 23.6 percent in 2019 (World Bank).

Partial data for FY2021 suggest that exports of goods and services (US dollars) could rise by 31 percent following a decline of over 41 percent in FY2020, while imports of goods of services are on track to rise by about 10 percent after a decline of 17 percent in FY2020. Given the much larger magnitude of imports compared to exports, this could give rise to a current account deficit of about 0.3 percent of GDP in FY2021 compared to a surplus of 3.4 percent of GDP in FY2020, an atypically strong outcome driven in part by a surge in remittances. Gross international reserves are nonetheless projected to remain stable in the coming months at about US$2.5 billion, or 4.9 months of projected imports. Net international reserves have declined steadily as foreign exchange liabilities to the banking sector have risen. Overall, external financing needs are estimated at about 2.9 percent of GDP for FY2021, excluding official transfers.

Together with ongoing political instability, this context has weighed on domestic revenue collection, which as a percent of GDP is expected to fall from an already very low 6.2 percent of GDP in FY2020 to 6.0 percent in FY2021. With the rise in fuel subsidy costs related to higher global fuel prices, financing constraints have remained acute and have contributed to a sharp reduction in non-fuel domestically funded public spending which is expected to decline from 7.9 in FY2020 to 7.3 percent in FY2021. While inflation has decelerated over the past year, high monetary financing of the fiscal deficit, rising oil and commodity prices, and supply disruptions contributed to an average inflation estimated at 16.2 per-cent in FY2021.2 Risks to the outlook are significant, particularly relating to ongoing political uncertainty and gang-related security problems. Following the assassination of President Moise on July 7th and the formation of an interim government, the calendar for presidential and legislative elections is unknown and it is not clear whether a constitutional referendum will take place.

As the spread of COVID-19 was much lower than expected, the authorities have spent less on COVID-related needs than anticipated. Although the authorities have not provided data on COVID-related spending since January 2021 (covering the March 2020-January 2021 period), trends up to June 2021 suggest that FY2021 spending on education, health and social protection should be roughly one third less than expected and in line with the level of the pre-COVID period. In fact, the 2021 budget had already planned a decrease in COVID spending from 0.6 percent of GDP (realized) to 0.1 percent (budget) but the difficult revenue situation is likely to have pushed COVID spending even lower. 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 would provide support to health spending in the event the spread from the variants continues to rise, as well as to the announced broader medium-term recovery objectives.

Governance safeguards. The authorities tracked and monitored COVID-related expenditures, publishing four different reports in April, May, and September 2020 and January 2021. They have not provided any update since then as spending on COVID-related needs in 2021 largely stopped (see above). 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. A thorough audit of Covid-related spending remains a key aspect of the Fund’s re-engagement in Haiti. In June 2021, the Minister of Economy and Finance formally requested the Cour Superieure des Comptes et du Contentieux Administrative to prepare the audit and the authorities indicated that it should be concluded during 2021. Moreover, a revised central bank law, prepared with assistance from LEG last year, has not been finalized. This is needed to strengthen the central bank’s autonomy and governance arrangements. Fund staff are providing technical assistance to the authorities in support of their efforts to strengthen the governance and transparency of public procurement processes, including related to beneficial owners.

Fund support status. Haiti does not currently have an IMF arrangement and has outstanding debt to the IMF of SDR 128.3 million. On April 17, 2020 the IMF Board approved a disbursement of SDR 81.9 million (US$111.6 million) under the Rapid Credit Facility to help cover balance of payment needs stemming from the COVID-19 pandemic, providing funding in a context of limited external financing and raising amounts due to the Fund to 78 percent of quota (January 2021) from 33 percent in March 2020. Haiti also benefited from debt relief under the Catastrophe Containment and Relief Trust (CCRT) worth SDR 15.912 million (US$ 22.679 million) covering debt service to the IMF falling due from April 14, 2020 to April 13, 2022, thus freeing up resources to meet exceptional balance of payments needs arising from the COVID-19 pandemic. Staff reached understandings with the authorities on a Staff Monitored Program (SMP) in May 2020 but the SMP was ultimately not approved because prior actions related to governance were not implemented. Since then, and as noted above, staff have been working with the authorities to strengthen governance in the area of public procurement so that sufficient assurances are in place to allow the Fund to resume discussions for an SMP.

Upcoming debt service. Haiti has debt service of SDR 0.866 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period currently covered by the fourth tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability. Note that the Haiti received SDR 157 million (about US$224 million) from the August 2021 SDR allocation which could be used to meet upcoming debt service payments or be exchanged to meet spending related to earthquake needs, including response and recovery, medical and health spending, and possibly wage arrears. IMF members can also use SDRs in a range of other authorized operations among themselves (e.g., loans, payment of obligations, pledges) and in operations and transactions involving the IMF, such as the payment of interest on loans, repayment of loans, or payment for quota increases.

Haiti: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Projection based on October 2020 – June 2021 data.

Increase in Education spending in 2020/21 are not related to COVID-19.

Source: Haiti authorities; and IMF staff estimates and projections

Staff assessment. Staff assess that the resources freed by the first, second and third 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 and of the August 2021 earthquake on the 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.

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

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

Annex XVIII. Liberia: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic continues to adversely affect the Liberian economy. The third wave of the pandemic, which started in June, is likely to slow non-mining economic recovery in 2021 to 2.9 from 3.4 percent reflecting protracted COVID-19 restrictions. However, the slowdown in non-mining GDP growth is compensated by mining sector growth leaving overall GDP growth projection for 2021 unchanged at 3.6 percent and the level of real GDP 4.7 percent below pre-COVID-19 projections. Since the onset of the third wave of the pandemic, the pace of vaccination has increased, thanks to the arrival of additional 96,000 doses of AstraZeneca vaccines under the COVAX Initiative, bringing the total under the initiative to 496,000, as well as 302,400 doses of Johnson and Johnson from the United States Government. This is enough to vaccinate about 20 percent of the eligible population.1 As of September 3, 2021, a total of 113,680 doses have been administered, with 27,392 people (representing 1.2 percent of the eligible population) fully vaccinated. 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, but stronger-than-expected domestic revenue performance and more budget support from development partners reduced the pressure. 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) relative to pre-pandemic projections to 0.7 percent of GDP in FY2020. The balance for FY2021 remained unchanged. The economic fallout of the COVID-19 shock resulted in 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. Thanks to exchange rate appreciation in the last quarter of 2020, inflation has eased to single digits. However, financial sector risks are higher as the impact of the pandemic contributed to increasing NPLs.

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 FY2020,2 FY2021, and July-December 2021,3 COVID-19-related spending is estimated at 6.1 percent of GDP—2.5 percent of GDP, 3.4 percent of GDP, and 0.2 percent of GDP respectively. It comprises: (i) increases in priority spending in health, education and expansion of social programs, including the distribution of food aid (2.7 percent of GDP), and (ii) other COVID-19-related spending (3.4 percent of GDP), including cash transfers and transfers to State Owned Enterprises whose performance was negatively affected by the pandemic.

Governance safeguards. The authorities have made 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 the full text of large procurement contracts for FY20 (these contracts cover all types of spending, not just COVID-19 related spending) and information on legal ownership of companies winning contracts; FY21 contracts are not yet published, (ii) increasing the scope of public expenditure being processed through the Integrated Financial Management Information System (including all on-budget COVID-19 emergency spending), (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. The audit of the annual financial statements of the government for FY2020 by the General Audit Commission is near completion, but the preparation of the audit for FY2021 is facing delays amid implementation challenges. In addition, the special audit for COVID-related spending during February to June 2020 has been finalized and the preparation of an update for the period July to December 2020 is underway.

Liberia: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Source: Liberian authorities, and IMF Staff estimates Notes:

Fiscal year is from July to June, FY2021 is from July 2020 to June 2021.

The authorities are changing the fiscal year from July-June to Jan-Dec, they are using the special budget for Jul-Dec 2021 to bridge the transition.

Source: Liberia authorities; and IMF staff estimates and projections

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 34 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 3.103 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. Staff assesses that Liberia is pursuing appropriate macroeconomic policies to mitigate the negative impact of the pandemic and that resources freed by the first, second and third tranches of Fund debt service relief under the CCRT, and other support from the Fund, have been 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, 2019–26

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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

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

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.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XIX. 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 number of cases has been kept low (at around 0.15 percent of the population) albeit with high positivity rates. In the context of a dramatic second wave and under pressure from development partners, the authorities joined the COVAX initiative in March 2021, but the vaccination rate of the population remains at about 0.7 percent. Real GDP is estimated to have contracted by 6.1 percent in 2020, owing to collapsing tourism and mining production, along with lower domestic demand due to lockdown measures. Due to the decline in economic activity and tax exemptions to mitigate the impact of the pandemic, tax revenue fell by 1.2 percentage points of GDP y-o-y in 2020 to 9.4 percent of GDP; and the domestic primary balance turned from a small surplus in 2019 to a deficit of about 2.3 percent of GDP in 2020. The current account deficit significantly widened to an estimated 5.3 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 and two ECF disbursements are expected to be disbursed in 2021. However, the economic and social crisis, combined with a protracted drought in the South, has created the conditions for a famine affecting 1.3 million people, and nearly 1.4 million people are expected to have fallen below the poverty line of US$1.9/day in 2020, bringing the poverty rate to 77.4 percent, according to the World Bank. Following a deep recession in 2020, economic activity has started to rebound since early 2021, supported by net exports and resilient financial services. A partial economic rebound is expected in 2021, with real GDP projected to grow by 2.9 percent, while the fiscal stance will remain accommodative with an anticipated domestic primary deficit of 3.1 percent of GDP. The current account deficit is expected to widen to 5.8 percent of GDP in 2021 due to increasing energy prices and lower vanilla prices. The longstanding economic impact of the pandemic, postponement of some external budget support, and delays in structural reforms are also opening BOP financing gaps, estimated at about 3 percent of GDP in 2021 and 1.1 percent of GDP per year on average over 2022–24.

Public Health and Macroeconomic Policy Response

The government deployed a Multisectoral Emergency Plan to address the pandemic. A state of emergency was declared in March 2020 (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 adopted by the government in July 2020 but its implementation was slowed down until February 2021 due to the lack of an operational Steering Committee. Policy actions 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 4.4 percent of GDP in 2020 and 4.3 percent of GDP in 2021 (compared to 4.5 percent of GDP in the previous projection). The budget of the four main social ministries has been decreased by about 0.3 percent of GDP in the 2021 revised budget law compared to the initial one. 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.

Governance safeguards. The authorities made progress on publishing information on COVID-19 related spending, following up on commitments made for the 2020 RCF (IMF Country Report No. 20/268). The Ministry of Economy and Finance website (see here) provides the list of all the external grants and loans received to mitigate the impact of the pandemic, information on spending (MGA 1,870 billion committed as of August 20th, 2021) including details by Ministries, by category of spending, and specific subcategories (e.g., payments for hospitalization, treatment, and care). The same website provides links to 99 of the 111 public procurement contracts (fewer than previously reported following data review) including information on their purpose, the amount of financial transfers, and the names of awardees (whether individuals or companies). 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. However, the operationalization of a dedicated COVID-19 Pandemic Response Fund remains unclear. Created in July 2020, it was only operationalized in April 2021 with a reduced budget, and a governmental decision in April exempting the Fund from normal procurement rules has raised concern among development partners. Technical assistance support is continuing to further improve the monitoring of COVID-19-related spending as part of the broader PFM CD agenda.

Madagascar: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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January 2020 Article IV projection.

Source: Madagascar authorities; and IMF staff estimates and projections

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 the 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. A new 40-month arrangement under the Extended Credit Facility (ECF) was approved by the IMF Executive Board on March 29, 2021, equivalent to SDR219.96 million (about US$312.4 million or 90 percent of quota). The program focuses on mitigating the economic impact of the pandemic, maintaining macroeconomic stability, and reviving the reform momentum to raise and sustain growth and reduce poverty.

Upcoming debt service. Madagascar has debt service of SDR 6.11 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. Staff assesses that Madagascar is pursuing appropriate policy responses to the pandemic and 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 2021 mainly reflecting weaknesses in the planning, execution, monitoring and reporting of this spending. Finally, the COVID-19 Response Fund should be subject to the same transparency procedures as for all COVID spending.

Table 1.

Madagascar: Selected Economic and Financial Indicators, 2020–26

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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.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XX. Malawi: Update for CCRT Debt Relief

Recent Economic Developments. Malawi has faced a severe second round of COVID infections in February 2021 and a further uptick in mid-June. The number of cumulative positive cases of COVID-19 increased from 25,895 to 60,090 between February and August 2021, though daily positive cases have started to decline since mid-July. The severity of COVID infections is expected to weigh on economic recovery in 2021 and 2022; growth has been revised downward to 2.2 and 3.0 percent, respectively, which implies negative per capita growth. Inflation increased to 8.7 percent at end-July 2021 from 7.6 percent in 2020, driven by increases in prices for fuel, fertilizer and food. Increasing health and social spending led to an increase in the FY2020/21 primary deficit to 4.5 percent of GDP (Table 1) from 1.6 percent of GDP the year before (Text Table 1).1 A further increase in social spending will increase the primary deficit to 5 percent of GDP in FY2021/22. The overall deficit would reach 8.8 percent of GDP due to the sizeable domestic interest payments, putting further pressure on already high total public debt. The current account in 2021 has widened to 14.7 percent of GDP and is projected to remain elevated in 2022. Gross official reserves are projected to significantly decline to US$144 million by end-2021 (equivalent to 0.5 months of imports) from US$565 million (equivalent to 2.9 months of imports) at end-2020, even after accounting for the SDR allocation. External financing needs are projected to remain elevated in 2021 and the medium term.

Policy Response. With the help of development partners and the Fund, COVID-related health care and social spending reached 0.4 percent of GDP in FY20/21 but is expected to fall to 0.2 percent of GDP in FY21/22, as the number of positive COVID cases declined since July 2021 (Text Table 1). This financial support helped develop testing capabilities and isolation centers, import medical equipment, hire medical staff, and raise public awareness. In addition, the government rolled out in February 2021 a National COVID-19 Vaccine Deployment Plan with a target of reaching 20 percent of the population by end-2021, benefiting from the COVAX facility.2 To support small and medium enterprises (SMEs) during the evolving Covid-19 pandemic, commercial banks and micro-finance institutions have been providing moratoria on their debt service until a date to be determined, while continuously assessing economic conditions. To support the economy, the Reserve Bank of Malawi maintained its accommodative monetary policy stance adopted at the outset of the COVID shock, keeping the policy rate at 12 percent.

Malawi: COVID Related Fiscal Measures, 2021–22 1/

(Percent of GDP)

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Source: Malawian authorities; and IMF estimates and projections.

Presented in CY but please convert to FY if necessary and specify FY. Per DSSI GN, CY to FY conversion would be CY21 is equivalent to FY21/22 and so on. Government periphery is central government.

Most recent projection before March 1, 2020

FY2021/22 is a 9-month fiscal year.

Source: Malawi authorities; and IMF staff estimates and projections

Governance safeguards. Addressing governance weaknesses is a top priority for the new government. Actions are already being taken against civil servants involved in the mismanagement of COVID-19 funds (MK6.2 billion). To ensure an effective and transparent use of financing related to COVID19, the authorities are publishing on an ongoing basis the 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. Work is ongoing to publish beneficial ownership information of awarded companies; conduct ex-post validation of delivery on contract-by-contract basis; publish quarterly statements on commitments and payments of COVID-19 related activities; and specify 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, within 180 days after the end of the pandemic, 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. In response to the pandemic, the Executive Board approved on May 1, 2020 the Malawian authorities’ request for emergency financing under the Rapid Credit Facility (RCF) equivalent to 47.9 percent of quota or SDR 66.44 million. The new administration came into office in June 2020 and cancelled the 2018 ECF arrangement in September 2020. Due to the severe impact of the pandemic, the Executive Board approved on October 2, 2020 the authorities’ request for another disbursement under the RCF of 52.1 percent of quota (SDR 72.31 million), 30 percent of which was provided as budget support. The authorities requested a successor arrangement in April 2021, aligned with their long-term development strategy (Malawi Vision 2063) launched in January 2021.

Upcoming CCRT-eligible debt service. Malawi has debt service of SDR 6.724 million falling due to the Fund during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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. In the context of the authorities’ request of a Fund-supported program, discussions are ongoing on a set of well-targeted reforms to help the Malawian authorities respond to the global pandemic, correct elevated and further growing macroeconomic imbalances, and support long-term development. Staff not only emphasize the importance of promptly addressing debt vulnerabilities, fiscal imbalances and rebuilding gross official reserves, but also the criticality of quickly strengthening fiscal and central bank governance to address significant weaknesses and ensure efficient use of public resources. The Fund continues to provide technical assistance in various areas, including domestic revenue mobilization, public financial management, and statistics to support the authorities’ reform efforts. Ongoing efforts to enhance transparency and accountability of spending and strengthen commitment and cash expenditure controls by launching the much-improved Integrated Financial Management Information System (IFMIS) could 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 and IMF staff estimates and projections.

The current financial year, 2021, runs from July 1, 2020 to June 30, 2021. FY2021/22 covers 1 July 2021 to 31 March 2022, to accommodate the transition to an April – March fiscal year starting from FY2022/23

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 nontax revenues.

Data source: Human Development Report, 2020.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XXI. Mali Update for CCRT Debt Relief

Recent Economic Developments. COVID-19 continues to have a notable economic impact on Mali, exacerbating the effects of the socio-political and security crises.

  • Mali has already undergone three waves of infection, with the total number of registered cases reaching 14,874 as of August 31, 2021, of which 539 deaths. The third and the strongest wave started at end-February 2021 and peaked at a record high of over 400 new cases on April 9, with the spread of the pandemic having slowed significantly since then.

  • After contracting by 1.6 percent in 2020 due to the pandemic-related collapse of external demand, the containment measures, socio-political turmoil and a weak year in agriculture, real GDP is expected to recover in 2021 to some 4 percent of GDP, still below the estimated potential growth of around 5 percent (2 percent in per capita terms). A recovery in the cotton sector, continued accommodation by monetary and fiscal policies and stronger external demand appear to be supporting the recovery in 2021, but downside risks remain. As in other countries, headline inflation spiked in the first half of 2021 due to higher food and energy prices, to over 5 percent year-on-year, but has since subsided to within the central bank’s target band 2±1 percent. BOP pressures are also picking up in 2021 with a higher cost of imported fuel and a lower price of gold (main exports), with the external current account expected to widen to over 5 percent of GDP.

  • The downturn in economic activity during 2020–21 is estimated to push 850 thousand people into extreme poverty, increasing its incidence from 42 percent of the population (8.2 million people) in 2019 to over 45 percent in 2020–21, according to World Bank estimates.

  • Fiscal policies supported the economy and the most vulnerable through 2 percentage point of GDP wider deficits in both 2020 and 2021. However, as some of the economic and social pressures translated into permanently higher spending (e.g., for public wages, including teachers) and as heavy reliance on domestic financing following two coups d’etat in 2020–21 increases the interest bill, the return to the WAEMU ceiling of 3 percent of GDP by 2024 will be more challenging.

Public health and macroeconomic policies. In 2021, the authorities focused on the vaccination campaign and prepared a national vaccination plan that prioritizes medical workers, the elderly and those with underlying health conditions. This first wave of vaccinations, under the umbrella of the COVAX initiative, started in April 2021, with the aim to reach some 20 percent of the population (40 percent of those above age 15) and a subsequent rollout to the rest of the population as more vaccines become available. In the event, the vaccination campaign has been slow, in large part due to weak demand, with only 0.8 percent of the population vaccinated by end-August 2021. 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 2020 and a 2020 package of fiscal measures to support vulnerable households and firms totaling about 2 percent of GDP, the authorities allocated an additional 0.9 percent of GDP to combat COVID-19 pandemic in 2021 (text table). Estimates indicate that 95 percent of the 2020 stimulus had been implemented (although household income support is yet to reach all households due to delays in identifying potential beneficiaries) and around 20 percent of the 2021 stimulus has been executed by end-May 2021.

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 (i) the publication of information on COVID-19 spending; (ii) the commissioning and publication of an independent audit of this spending; and (iii) the publication of information on large procurement projects, including beneficial ownership, by end-May 2021. To meet these commitments, the authorities started the monthly publication of the COVID-19 expenditure reports in October 2020; initiated an independent audit of COVID-19 related expenditure by the Office of the Auditor General (BVG), expected to be published by end-2021; and—following technical discussions with the Fund on the collection and publication of beneficial ownership information, as well as a recent Governance Assessment—the government has committed to issuing a circular letter requiring all companies awarded with procurement contracts to submit beneficial owners’ information, subsequent to which the documentation on large public procurement contracts will be published. While the implementation of the safeguards has been delayed relative to the original plans, including by the recent coup d’etat and the need to clarify data protection issues, the authorities have expressed their commitment to seeing them through.

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

Source: Mali authorities; and IMF staff estimates and projections

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, second and third tranche of debt service relief under the Catastrophe Containment Relief Trust (each around US$10 million, 0.06 percent of GDP) approved on April 13, October 30, 2020, and April 1, 2021 respectively, and (iii) second and third reviews under the Extended Credit Facility arrangement (around US$57 million, 0.3 percent of GDP) that were completed by the Executive Board on February 22, 2021.1 Discussions under the fourth review started in May 2021 and were interrupted by a coup d’etat. They resumed in July after the formation of the new government and, to allow more time for the completion of the reforms, will continue later in the fall 2021.

Upcoming CCRT eligible debt service. Mali has debt service of SDR 5.7 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. The unabating socio-political, health and security crises have delayed reforms and are adding to the fiscal pressures, but the government continues to pursue macroeconomic policies to address the pandemic and advance structural reforms. Staff assesses that the resources freed by the first three 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. Going forward, increased vigilance and a renewed reform momentum will be needed to preserve the government’s ability to address the social and growth imperatives of Mali through sustainable and quality fiscal policies.

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.

Projections from 2022 include tax policy measures of 0.5–0.7 p.p. of GDP.

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

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XXII. 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, with the poverty headcount rate estimated to have increased by 1.4 percent in 2020. 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 country has undergone two severe waves of infections during Jan-Mar and Jun-Aug 2021. Lockdown measures and weak external demand weighed on activity despite the support of a good agricultural harvest. With the pandemic ongoing, cyclone Eloise having struck the central regions of the country at the beginning of 2021, and a terrorist insurgency in the North of the country having displaced more than 800,000 people, real GDP growth is projected to only partially recover this year, to 2.5 percent (versus a pre-COVID projection of 4 percent). Inflation remained subdued in 2020 (3.1 percent e.o.p.) but has increased in 2021 due to currency depreciation and COVID measures periodically restricting the supply of consumer goods. The primary deficit after grants has widened to 2.7 percent of GDP in 2020 due to lower revenue and crisis spending, and is expected to widen further to 3.6 percent in 2021. The current account deficit has widened by 3 percentage points of GDP to 27.2 percent of GDP owing mainly to a decline in commodities export receipts, and is expected to widen to 34 percent of GDP in 2021. Public debt is now expected to peak in 2021 at about 135 percent of GDP. The external financing need reached 4.9 percent of GDP in 2020 and is projected to amount to about 3.4 percent in 2021.1 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 percent of GDP in 2020), and the 2020 revised budget has allowed for higher COVID-related spending to support businesses and vulnerable households (by about 1 percent of GDP). In 2020, the authorities received about US$ 659 million (4.7 percent of GDP) in grants and concessional financing from development partners. For 2021, the authorities have assigned about 2.1 percent of GDP for COVID-19 emergency spending, of which 1.5 percent of GDP are earmarked for the vaccination campaign, while about 0.6 percent of GDP are expected to be used for social assistance for poor households. Other health expenditure is expected to increase to 3.9 percent of GDP in 2021, from 3.6 percent in 2020. 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.

Governance safeguards. The authorities are committed to reforms to strengthen governance, transparency and accountability in line with recommendations of the Government’s Diagnostic Report on Transparency, Governance and Corruption published in August 2019. With respect to crisis mitigation measures, the government has made progress in implementing 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, which is being undertaken by the supreme audit institution (the Tribunal Administrativo), supported by ongoing Fund technical assistance, and is expected to be completed by the end of 2021. The government has published regular reports on funds received and their allocation on the Ministry of Finance website, while the Health Ministry has published information on public procurement contracts in the health sector on their website. In general, information on shareholders of companies is publicly available through the Legal Entities Registrar, which could include companies awarded public procurement contracts. However, this information relates to shareholders and not beneficial owners as such, and the authorities face significant challenges with holding accurate and up-to-date beneficial ownership information in the country. The authorities submitted a revised budget to parliament in September 2020 to fully account for COVID measures and financing and have opened earmarked accounts at the central bank for spending on health and support to households.

Mozambique: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Source: Mozambique authorities; and IMF staff estimates and projections

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 are ongoing.

Upcoming debt service. Mozambique has debt service of SDR 9.467 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. There is no debt service falling due during the remaining period from January 11, 2022 to April 13, 2022.

Staff assessment. Staff assesses that Mozambique is pursuing appropriate macroeconomic policies to address the global pandemic. Staff also assesses that the resources freed by the initial tranche of Fund debt service relief under the CCRT, and other support from the Fund, are being used to help provide emergency health, social and economic support to the economy to mitigate the impact of the pandemic on 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).

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

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

Annex XXIII. Nepal: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic continues to have a severe economic impact on Nepal through a drop in tourism, stalled construction, and subdued economic activity. Since April 2021, the growth outlook deteriorated as Nepal experienced a devastating second wave of COVID-19 infections that interrupted the growth momentum earlier in the fiscal year (FY ends mid-July and estimates are still preliminary). In this context, real GDP growth in FY2020/21 is estimated at 1.8 and 4.4 percent in FY 2021/22 (compared to 5.7 and 5.5 percent respectively in the pre-pandemic baseline). As a result of temporary factors, the overall fiscal deficit narrowed from 5.3 percent of GDP in FY2019/20 to 4.6 percent of GDP and debt of 46.7 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).1 Revenues in FY2020/21 benefited from increases in import related taxes and deferred tax receipts. However, budgeted expenditures including those in priority areas, underperformed relative to estimates in the last CCRT update due to implementation capacity constraints from the devasting effects of the second wave of COVID-19 and associated lockdown measures in place since April 2021. In FY2021/22, the fiscal deficit is estimated at 7.1 percent of GDP as the impact of temporary factors on revenues dissipate, while higher expenditure needs arise from the resumption of capital projects, ongoing need for economic support, and the government’s plans to accelerate vaccine delivery. The current account deficit widened to 8.3 percent of GDP in FY2020/21 and will only fall slightly to 6.7 percent of GDP in FY2021/22 as imports surge due to the resumption of economic activities and higher global food and fuel prices. Reserve coverage (8.9 months of imports in FY2020/21) is expected to remain adequate in FY2021/22 supported by an SDR allocation of approximately US$214 million approved by the IMF Executive Board in August 2021. While the flow of remittances surprised on the upside, job losses at home compounded by return migration, and limited coverage of social assistance programs, may likely be a setback to poverty alleviation gains in recent years.

Public health and macroeconomic policy response. The authorities have continued to take measures to address the domestic impact of the pandemic including the tailored reimposition of lockdown measures since April 29, 2021. Additional measures announced in the FY2021/22 budget include: (i) free tests, treatment and vaccinations for all Nepali citizens (11 percent of the population have received a 2nd dose of the vaccine); (ii) purchase of medical equipment and supplies such as ventilators and oxygen cylinders; (iii) further tax relief to households and businesses; (iv) increase in social security allowance by 33 percent including the amount of child protection grant and senior citizens allowance; (iv) expand the scope of Social Security Fund to informal sector workers. To support the continued supply of credit, the Nepal Rastra Bank (NRB) in FY2021/22 has maintained the Refinance Facility Fund to provide subsidized interest rates to banks willing to lend to priority sectors, and eased macroprudential measures (postponed the implementation of the regulation to require banks to build up a counter cyclical capital buffer).

Nepal: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1,2020.

Projection as of August 2021.

Source: Nepal authorities; and IMF staff estimates and projections

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. Specifically, the Office of the Auditor General (OAG), an independent Constitutional body, audits the government accounts on an annual basis, as per its mandate, and publishes the results on the OAG website. The latest OAG report for FY2019/20 was published in August 20212. In addition, spending from the Covid-19 Fund—an extra-budgetary fund with financing from government, development partners, and the private sector—is being published monthly3 and the OAG is also expected to audit this Fund in 2022. In the context of the Rapid Credit Facility disbursed in May 2020, the authorities committed to take further steps, including publication of budget expenditures related to Covid-19 and publication of beneficial ownership information for new, large, Covid-19 related procurement contracts. The authorities have reiterated their intention to fully meet these commitments and have taken important steps in this regard including the preliminary publication of beneficial ownership information on the Department of Health’s website4, which continues to be strengthened, in consultation with Fund staff. Overall, progress on the full implementation of these measures continues to be impacted by the pandemic and associated prolonged lockdown measures.

Data gaps. The fiscal data available for Nepal only cover the central government. Therefore, the total public spending on priority areas (including on health, education, and social assistance) will be higher than reported due to additional spending in these areas by local and provincial governments which the data does not capture. The authorities do not currently have adequate mechanisms in place to track COVID-19 related spending in the budget separately from other priority spending.

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. Discussions are ongoing 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 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 including the governance safeguards set out above.

Upcoming debt service. Nepal does not have debt service due to the Fund during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. Staff assesses that Nepal is pursuing appropriate macroeconomic policies to address the global pandemic. Ongoing efforts to enhance transparency and accountability of COVID-19 related spending will help provide assurances that the resources freed by the first three tranches of Fund debt service relief under the CCRT, and other support from the Fund and development partners, 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.

Nepal: Selected Economic Indicators, 2018/19–2025/26 1/

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

Fiscal year ends mid-July.

Net incurrence of foreign liabilities cover previously identified financing and new financing (identified as of end-August 2021) to support Nepal’s COVID-response. The new financing include the IMF prospective ECF (US$398.8 million for FY2021/22-FY2024/25), World Bank (US$500 million for FY2020/21-FY2022/23), Asian Development Bank (US$200 million for FY2020/21-FY2023/24), and DSSI (US$52.6 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 third tranche of CCRT debt relief covering the period April 14, 2021 to October 15, 2021 for SDR 3.6 million was approved on April 1, 2021. CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Note: 2020 Article IV Baseline is based on data as of end-Jan 2020, and current baseline forecast is as of August 26, 2021.

Annex XXIV. Niger: Update for CCRT Debt Relief

Recent economic developments.1 In April 2021, Niger achieved its first democratic transfer of power. The new government is committed to sustained macroeconomic policy and medium-term reform while the political economy remains challenging. The updated outlook for the Nigerien economy has been slightly revised compared to the projections of April 2021. Real GDP growth for 2020 has been revised upwards at 3.6 percent—due to higher agricultural production. It is projected to pick up this year at 5.4 percent—instead of 6.9 percent as previously forecasted, largely due to the base effect—, 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. While the direct health and economic impacts have been relatively mild with Niger’s limited exposure to international value chains and a large informal agricultural sector affording 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. 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 5.3 and 6.6 percent of GDP. This primarily reflects the need to step up security and infrastructure spending to address the heightened security risks in the Sahel region, as well as the revenue shortfalls related to the economic slowdown and difficulties in collecting taxes under pandemic conditions. The current account deficit is projected to widen from 13.5 percent of GDP in 2020 to 15.5 percent in 2021, as domestic economic activities recover and large-scale projects resume. External financing needs will remain high in the short-to-medium term, reflecting the difficult fiscal situation as well as sustained development needs.

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. With the resurgence of new cases, however, the authorities extended the state of emergency for a further period of three months from January 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. Expenditure figures are unchanged since last update because the latest available spending data by functional area are from Q3 2020. They 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 percent2 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 9.1 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.

Source: Niger authorities; and IMF staff estimates and projections

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 Court of Audit is also committed to carrying out an audit of COVID-related spending, although to allow more time for the technical work of the audit, the government has noted that the publication date may have to be delayed to December rather than September.3 The government is publishing data on public procurement (plans, tenders, and contracts awarded)4 with larger contracts (over 0.5 billion CFA), which are subject to the review and approval of the Council of Ministers. Although it has not yet been published, the list of Covid-related emergency procurement contracts has been shared with the IMF and other development partners. The government has not yet begun collecting beneficial ownership information but has committed to begin doing so. 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. The authorities have published on an official website5 the updated report on asset declarations of all members of government—providing information on the total value of assets and the ministers that are current in their declaration. 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 Autorite de Lutte contre la Corruption et les Infractions Assimiiees (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 RCF (SDR83.66 million, 63.6 percent of quota) was approved on April 14, 2020. Following an official request from the authorities, discussion on a successor ECF program was initiated in June 2021.

Upcoming debt service. Niger has debt service of SDR 5.029 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff appraisal. Staff assess that Niger is pursuing appropriate macroeconomic policies to address the global pandemic. The government has reiterated its commitment to strengthen the governance framework under the new program in discussion. They notably intend to: (i) issue a regulation requiring all Covid-related new public contracts to request the beneficial ownership information of companies submitting bids, with the information of the winning company to be published (proposed program prior action); (ii) extend the requirement to provide and publish beneficial ownership information to all non-competitive bids; and (iii) improve transparency of the asset declaration regime by the adoption and publication of a new template for members of government providing more details on their assets while redacting sensitive information that might affect their security. Staff has received reasonable assurances from the authorities that these commitments will be met. Staff also assess that the resources freed by the first three 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.

Includes CCRT debt relief.

Revenue including grants minus expenditure; WAEMU anchor.

Includes from 2017 onward, debt associated with commercial PPPs.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XXV. Rwanda: Update for CCRT Debt Relief

Recent Economic Developments. COVID-19 continues to impact Rwanda. Despite a sizeable policy response, the protracted nature of the COVID-19 pandemic continues to affect the economy and social fabric. Notwithstanding a second wave of infections in December 2020 and a three-week lockdown in Kigali in January 2021, Q1 2021 growth registered 3.4 percent on the back of a strong performance in agriculture, helped by a good harvest, and rebound in manufacturing. High-frequency indicators point to a continued recovery in Q2 2021. Headline inflation remained low in 2021, reaching -0.4 percent y/y in July, owing to a decline in food prices supported by a good harvest and base effects from the increase of transport fares the previous year. Real GDP growth for 2021 is projected at 5.1 percent. The slow vaccination rollout and renewed mobility restrictions in 2021 Q2 following the latest surge of infections risks delaying the economic recovery. The social impact of the pandemic is expected to be significant, with poverty now projected to increase by almost 4 percent between 2019 and 2021, close to 900,000 new poor over two years.1 The IMF’s two RCF disbursements, concessional resources from development partners, and higher-than-anticipated remittances helped to close the fiscal and external financing gaps. Fiscal and external balances are projected to deteriorate relative to their pre-pandemic projections, reflecting mainly additional COVID-19-related spending, higher oil prices, and a decline in net exports with a delay in resumption of tourism activities. This deterioration is expected to gradually reverse, as domestic and trading partner demand recovers.

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)

4th PCI review projections (June 2G21) and current projection.

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 unavialbedueto cross-funcional nature of NST pillars.

Total COVID-related spending

Public Health and Macroeconomic Response. The strong public health response sustained since CCRT-3 and containment measures continue to help prevent the spread of the virus and maintain fatality rates significantly below other sub-Saharan Africa countries. Despite Rwanda’s preparedness, sustained efforts to secure doses and lock in financing, vaccination rates, albeit faster than the sub-Saharan average of about 1 percent, remain slower than planned due to vaccine supply constraints. As of September 7, 12.8 percent of the population has received at least one dose of COVID-19 vaccine of which 7.1 percent of the population has been fully vaccinated against a 30 percent target set for end-December 2021. The government has continued to scale up its economic response to the pandemic to facilitate the vaccine rollout, support the recovery, and minimize social scarring. Initially costed at 3.3 percent of GDP and spanning the last two fiscal years (FY19/20 and 20/21), COVID-related spending under the Economic Recovery Plan (ERP) has been increased since the last CCRT disbursement and now amounts to 10.1 percent of GDP and was extended until FY 23/24 to better mitigate the expected larger and protracted impact of the pandemic. Near half of this amount (4.8 percent of GDP) is estimated to have been spent over the last two fiscal years (i.e. by end-June 2021). More than 3/4 (7.9 percent of GDP) is projected to be spent by the end of the current FY 21/22 budget to (i) prevent, contain, and manage the pandemic and its scars, including the vaccination drive and investments in education to minimize learning losses (3.3 percent of GDP); (ii) support vulnerable households through cash transfers, subsidized access to agricultural inputs, and public works (2.5 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 (2.1 percent of GDP). Tax deferral and relief measures benefitting households and corporates have all been phased out at end-December 2020.

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 government expenditures and procurement tenders for FY19/20, including those linked to the pandemic have been audited by the office of the Auditor General, whose independence is enshrined in the Constitution and Law with findings made public by end-April.3 Audits of COVID-19 related spending for FY 20/21 are expected to be published by end-May 2022 as part of the annual independent audit of the government accounts envisaged in the Constitution and Organic Budget Law.

IMF Program Status. Rwanda has a PCI supported program in place since June 2019. Program performance has been strong with all reviews but the second completed. In the latter case, an interim performance update was issued to the Executive Board in September 2020, as it was not possible to complete the review within the three month-period of the scheduled review given the large uncertainty around the near-term outlook and required policies and the need to prioritize the authorities’ requests for RCF disbursement. The third review was completed in December 2020 and the fourth review on July 1st, 2021, with the Board approving a one-year extension of the PCI. The fifth review is expected to be completed by end-December 2021. Two RCF disbursements under the “exogenous shock window” totaling SDR160.2 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. With the approval of the new SDR allocation, Rwanda received SDR 153.5 million (2.1 percent of GDP) which could be used for emerging needs related to the pandemic and to boost its reserves.

Upcoming Debt Service. Rwanda has debt service of SDR 8.01 million to the Fund falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 three tranches of Fund debt service relief under the CCRT, and RCF disbursements are being used appropriately 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.4

Table 1.

Rwanda: Selected Economic Indicators, 2020–261

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Sources: Rwandan authorities and IMF staff estimates.

Pre-COVID projections.

From FY19/20 (2020) to FY25/26 (2026). Fiscal year runs from July to June.

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

Based on prospective import of goods (excluding gold) and services.

The latest HDI value is for 2019. While placing Rwanda in the low human development category, it reflects a steady increase of 60 percent since 2000.

CC RT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CC RT.

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

Recent Economic Developments.1 São Tomé and Príncipe has maintained macroeconomic stability in the period since the April 2021 update. The authorities’ containment measures and other initiatives as well as international support helped mitigate the impact of the pandemic but the latter is still expected to further heighten social vulnerabilities (22 percent of STP’s population lived in extreme poverty as of 2019 and the country ranks 135 in the world Human Development Index). Growth is projected to slow to 2 percent in 2021 from 3 percent in 2020, reflecting delays in the return of tourists. This outlook is subject to significant uncertainty and downside risks, notably new waves of Covid infections. The 2021 overall fiscal balance is expected to widen by about 3.7 percentage points of GDP (compared with the 2020 outturn). The current account deficit is expected to narrow to 11 percent of GDP in 2021, an improvement of three percentage points over 2020, on account of lower imports of non-factor services and higher private remittances. The government’s gross financing needs remain large in 2021 (62.6 million of US dollars), and are being met by external disbursements, including IMF resources. About 25,600 people (12 percent of population) were vaccinated with at least one dose of Covid vaccine as of mid-July 2021. The authorities aim to vaccinate 70 percent of the population by mid-2022, fully supported by the COVAX initiative and the World Bank. Though the outbreak has been broadly brought under control by containment measures, the global spread of new COVID-19 variants accentuates the need for a timely and sufficient supply of vaccines to implement inoculations as planned.

Public health and macroeconomic policy response. The authorities are implementing the 2021 budget, which is a step toward gradual fiscal consolidation while maintaining COVID-related and pro-poor spending programs. Priority expenditure (mainly on education, health, and social assistance) is estimated to increase to 11.3 percent of GDP in 2021 from 7.3 percent of GDP in 2020. This includes other Covid-related spending of 0.7 percent of GDP. However, significant risks of under-execution persist in 2021, as priority expenditure through June amounted to only 3.9 percent of GDP due to revenue under-performance. In this context, the planned implementation of the VAT in 2021 and mobilization of external financing on grant and highly concessional terms remain critical. The SDR allocation will provide welcome external buffers in 2021 and a portion of it could safeguard critical priority expenditures from 2022 onwards.

Governance safeguards. As part of the ECF arrangement, the authorities have been publishing public procurement contracts and monthly COVID-19-related expenditure reports on the Ministry of Finance website, as well as adjudication notices and an ex-post validation of the delivery of public contracts. Moreover, an independent audit of spending is planned by October 2021 and will publish the results to confirm that funds were used for their intended purpose. In order to enhance the transparency of public contract awards, the authorities are also reviewing the procurement legislation to enable the collection and publication of beneficial ownership information of all awarded contracts, with Fund technical assistance support.

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.

Pre-COVID projections for 2021 are not available.

Source: São Tomé and Príncipe authorities; and IMF staff estimates and projections

IMF support 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 third review of the ECF arrangement on August 27, 2021. In addition, STP received SDR 14.2 million (3.6 percent of GDP) in the context of the general SDR allocation that became effective in August 2021.

Upcoming debt service. STP has debt service of SDR 137,428 falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. Staff assesses that STP is pursuing appropriate macroeconomic policies to address the global pandemic. Strong implementation of the policies and reforms supported by the ECF arrangement will be critical for macroeconomic stability going forward. Staff also assesses that the resources freed by the first three 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.

São Tomé and Príncipe: Selected Economic Indicators, 2019–26

(Annual change in percent, unless otherwise indicated)

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Sources: São Tomé and Príncipe authorities’ data and IMF staff estimates and projections, United Nations Human Development Report 2020.

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 debt to ENCO (and excludes the government’s arrears to EMAE due to consolidation).

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.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XXVII. Sierra Leone: Update for CCRT Debt Relief

Recent Economic Developments. The COVID-19 pandemic continues to impose large costs on the lives and livelihoods of Sierra Leone’s people. The third wave of infections-that started in June 2021-appears to be flattening with the number of daily COVID-19 cases reducing from over 100 to a single digit in August, but uncertainty around true caseloads persists amidst still relatively slow vaccination progress. After a sharp contraction in real GDP growth (by about 2.2 percent) in 2020, high frequency indicators suggest a moderate pick-up of activity in early 2021 following easing of COVID-19 containment measures and the removal of restrictions on inter-district travel. Real GDP growth is now expected to rebound to 3.2 percent in 2021, partly driven by the normalization of production of iron ore mining (at Tonkolili and later on at Marampa) and favorable iron ore prices. Ramped up production is also expected to increase iron ore exports, partly offset by weakness in rutile exports that is facing acute business challenges. A balance of payment (BoP) financing gap of about 0.6 percent of GDP would emerge in 2021 in the absence of the prospective CCRT debt relief. The fiscal situation remains tight, reflecting a still low revenue base, an elevated public debt level, and substantial increase in COVID-19-related and other priority expenditures. The overall fiscal balance is projected at about -3.8 percent of non-iron ore GDP in 2021, against -3.4 percent projected pre-pandemic. Sierra Leone’s public debt—already assessed at high risk of debt distress pre-crisis—is expected to increase to 73 percent of GDP in 2021. A recent return to the Extended Credit Facility (ECF) arrangement (after COVID-19 related delays in program review) is expected to support the authorities’ goals under their National Development Plan and provide an important policy anchor for macroeconomic stability and steer the economy towards more inclusive and sustainable recovery. The recent SDR allocation (of about US$283mn) will help increase reserve buffers while providing needed fiscal space for vaccine rollout, priority spending and to support economic recovery. 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 continued delays in vaccine rollout. Sierra Leone’s poverty head count of 57.9 percent in 2020 remains relatively high compared to other peers in sub-Saharan Africa and has potentially worsened. Further, the share of food insecure population has risen to 57 percent in 2020, 10 percentage points up from a decade earlier. Almost 4 percent of the population face severe acute malnutrition.

The government’s revised budget plans continue to appropriately support the COVID-19 response and emphasis is being placed on supporting the vaccination campaign. Updated expenditure plans that are expected to feature in the authorities’ 2021 revised budget remain consistent with estimates at the time of the April 2021 CCRT Board paper and recently completed ECF review. The 2021 budget reprioritized expenditure outlays to save lives and support livelihoods and economic recovery by allocating about 6.0 percent of GDP to COVID-related spending on health, education, and social sectors. The preliminary outturn for the period end-June 2021 suggests that transfers to the National COVID-19 Emergency Response Center (NaCOVERC) (for health supplies, additional health care workers, quarantine expenditures, and public awareness program) was slightly higher-than-budgeted, at 0.6 percent of GDP, including due to an uptick in case numbers in the context of the second and third wave of infections in June 2021. Cash transfers (of 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 early 2021, supported by the World Bank and European Union. Other COVID-related spending—including on prevention, containment, and management, transfers to households, transfers to SOEs (in the aviation sector), and labor-intensive public works projects— was around 1.3 percent of GDP in 2021. The 2022 budget envelope is expected to continue to prioritize health and social spending and supporting the recovery. The SDR allocation has allowed additional resources to be allocated to priority spending that needs to be safeguarded, can be ring-fenced and is easily monitorable such as vaccination expenditure, arrears clearance payments consistent with the arrears clearance strategy, domestically financed development spending, including support to ambulance services, school feeding program, and completion of water supply services). Vaccination rates have picked up slightly since June, helped by reinforced Government measures (restrictions to public building entry without vaccination, widening of the priority group to all those 18 years and older). Almost 2 percent of the population and almost 18 percent of health workers have received their first shot as of end-July 2021. The authorities are working with development partners to boost currently low vaccine supply stocks in-country and to address vaccination hesitancy through enhanced risk communication and public sensitization.

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.

Source: Sierra Leone authorities; and IMF staff estimates and projections

Governance safeguards. The authorities have continued to undertake their governance reforms, including by transparently accounting for the COVID-related spending. In line with their Rapid Credit Facility (RCF)commitments, they have published the unaudited financial statements of the NaCOVERC as of December 2020 and March 2021, and published certain details of large procurement contracts related to crisis mitigation through end-May 2021, including information on the names of companies awarded contracts and their beneficial ownership on the website of the National Public Procurement Authority (NPPA) and are reporting on their broader social and economic response. Parliament scrutinized the real-time external audit by the Audit Service of Sierra Leone (ASSL), a good practice that only few countries in sub-Saharan Africa have implemented. The authorities have started to take actions to address identified irregularities, including by implementing standard operating procedures, training all District Covid-19 Emergency Response Centers on principles of financial management, and taking steps to improve HR processes. 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 2020. A chart of accounts developed with the Accountant General facilitates the recording and reporting of the emergency response transactions. A fiduciary agent has been appointed to support NaCOVERC’s financial management.

IMF support status. Sierra Leone’s current program supported by a 43-month 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 while the combined 3rd and 4th ECF reviews were completed and approved by the Board in July 2021. Completion of these reviews enabled the IMF to disburse SDR31.11 million (about US$ 44.2 million), bringing total disbursements under the arrangement to SDR 77.775 million (about US$ 111 million). Sierra Leone has also accessed emergency funding support from the IMF through RCF disbursement of SDR 103.7 million (50 percent of quota) in June 2020 and a second disbursement of SDR 35.26 million (17 percent of quota) in March 2021.

Upcoming debt service. Sierra Leone has debt service to the Fund of SDR 6.00 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. Staff assesses that Sierra Leone is pursuing appropriate macroeconomic policies to address the global pandemic and COVID-19 vaccination campaign is gathering momentum. The first three tranches of Fund debt service relief under the CCRT have provided needed fiscal space to support pandemic responses. The government’s revised budget plans continue to appropriately support the COVID-19 response, while ensuring debt sustainability. Further debt relief under the CCRT in 2021 will allow the government to continue to respond to the COVID-19 pandemic, including ramping-up the vaccination drive. The government is taking steps to improve its PFM framework and has made notable progress towards fulfilling the governance commitments made under the RCF. Fund emergency support under the RCF as well as the ECF, that have been on-lent to the budget, have also played a vital role in funding Sierra Leone’s emergency response and August 2021 SDR allocation provides further legroom to respond to the pandemic while supporting inclusive and sustainable economic recovery.

Table 1.

Sierra Leone: Selected Economic Indicators, 2018–26

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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 from grants.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

Annex XXVIII. Solomon Islands: Update for CCRT Debt Relief

Recent economic developments. The COVID-19 pandemic continues to have a severe economic and social impact on Solomon Islands. Following a fall in real GDP in 2020, growth is expected to recover to 1.2 percent this year, with the initial recovery phase hampered by ongoing pandemic-related disruption and uncertainties. Data from the National Provident Fund suggest a significant decline in formal employment and the pandemic is likely to have disrupted progress in poverty reduction. The government announced an economic stimulus package in 2020 (with implementation continuing into the first half of this year) and has continued to reprioritize spending towards the COVID-19 response and essential services. Reflecting the 2021 budget released in April this year, the fiscal deficit is projected to remain broadly unchanged (at 2.5 percent of GDP) in 2021, with the cash balance remaining well below the staff-recommended minimum of two months of spending. Higher budgeted development expenditure is expected to be sustained over the next several years, reflecting an ambitious pipeline of infrastructure projects. Public debt, which was assessed at moderate risk of debt distress prior to the pandemic, is expected to rise over the medium-term. Donor inflows and various official disbursements, including assistance from the Rapid Credit Facility/Rapid Financing Instrument (RCF/RFI) emergency financing1 contributed to the build-up of foreign reserves. At end-July 2021, foreign reserves stood at US$666 million (about 10.2 months of prospective imports), with reserves coverage helping to preserve macroeconomic stability amid elevated uncertainty.

Solomon Islands: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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

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

Source: Solomon Island authorities; and IMF staff estimates and projections

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, and vaccinations. The initial pandemic-related increase in health care spending and support for the economy amounted to about 3.6 percent of GDP with additional support to those who lost their jobs provided through early withdrawals from the National Provident Fund (amounting to about 0.7 percent of GDP). The 2021 budget focuses on: (1) protecting economic and social wellbeing through improved service delivery and preventing the spread of COVID-19; (2) improving the quality of spending and redirecting resources to support the economic recovery; and (3) maintaining prudent macroeconomic and fiscal management. While about 60 percent of budgeted overall expenditure has been executed in the first seven months of this year, capital spending has been lower, in part owing to the late passage of the 2021 budget. COVID-19 related spending has been protected despite the overall reduction in budgeted recurrent spending. There is room to provide further support to the economy, including through prioritizing measures to safeguard health security (including vaccinations) and identifying additional financing to provide targeted lifeline support to vulnerable households and business. Monetary policy remains accommodative, and the central bank has purchased government bonds in the secondary market.

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. Building on the good practice of publishing information on stimulus recipients on the Ministry of Finance website and Fund technical assistance on procurement transparency, the authorities are working towards completing their commitments, including publication of an audit by the Solomon Islands Office of the Auditor General of COVID-19 related expenditures 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 financing 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 emergency financing assistance 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 0.059 million to the Fund falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

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 emergency financing 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, 2016–26

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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 (with 2012 as base year). Pre-COVID-19 ratios have been recomputed using the new GDP series for comparability

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 in 2021, and actual and prospective disbursements under the IMF-supported programs.

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

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.

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

Recent Economic Developments.1 Tajikistan was hit hard by the COVID-19 shock, in terms of both lives and livelihoods. Official data indicates that growth dipped to 4.5 percent in 2020 from 7.5 percent a year earlier, reflecting the impact of the pandemic. The economy began to recover once the containment measures were relaxed, and a strong recovery is now underway driven by the agricultural, manufacturing (primarily food processing), and mining (including gold) sectors. Inflation remains above the NBT’s target range (6±2 percent) due to higher food prices and the lagged effects of currency depreciation. The 2020 current account balance moved into surplus (4.2 percent of GDP) given high gold exports and import compression—a smaller surplus is expected in 2021 as imports pick up in line with the recovery and, over the medium term, a current account deficit is projected. Reserves have risen to 8 months of import cover. The increase in the fiscal deficit (by 250 bps to 4½ percent of GDP) in 2020 was less than budgeted due to delays on capital spending and low uptake on COVID relief programs. Monetary policy has been normalizing given the economic rebound. The 2021 budget deficit is expected to improve to -2.7 percent of GDP given delays in securing external financing for selected capital projects. However, although the recovery is expected to continue in the near term, risks to the outlook remain tilted to the downside due to uncertainty on the pandemic and regional inward spillovers.

Tajikistan: COVID Related Fiscal Measures

(Percent of GDP, unless otherwise indicated)

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Most recent projection before March 1, 2020.

Source: Tajikistan authorities; and IMF staff estimates and projections

In response to the pandemic, the authorities took a range of decisive policies measures to protect public health and to cushion the impact on the economy. The NBT responded by loosening monetary conditions to support economic activity and safeguard financial stability. In particular, the NBT cut the refinancing rate by 200 bps, reduced reserve requirements, increased FX liquidity provisions, and engineered a 17 percent depreciation of the currency vis-a-vis the US dollar. Banks were asked to restructure loans and avoid dividend distributions; certain supervisory sanctions were temporarily waived. Fiscal policy entailed tax breaks and other targeted relief measures, VAT exemptions on medical supplies and food, one-time transfers to vulnerable households, delayed tariff increases, and financial resources allocated for the SME fund. Grain, seed, and fuel support was provided to farms to increase food security. The Targeted Social Assistance program was extended to all 68 districts. Amid a new wave of regional infections, COVID vaccinations have been made mandatory across Tajikistan for all above 18 years in age. Priority spending (including health, education, and social expenditures) in 2021 is expected to exceed pre-COVID projections.

Governance safeguards. The authorities are making credible efforts to implement transparency measures. Quarterly COVID spending reports as well as their audits were published on the external website of the Ministry of Finance. The government is in the process of reforming the public procurement law. A new Public Procurement Law was expected to be sent to Parliament in 2021Q1, but has been delayed because of the ongoing inter-agency consultation process. After the approval of the law, all procurement is expected to be switched to the newly developed e-procurement system.

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

Upcoming CCRT-eligible debt service. Tajikistan has debt service of SDR 1.305 million falling due during the interval from October 16, 2021 to January 10, 2022, the maximum period covered by the 4th tranche of debt service relief under the CCRT. The debt service falling due during the remaining period from January 11, 2022 to April 13, 2022 will be covered subsequently subject to resource availability.

Staff assessment. Staff assesses that Tajikistan is pursuing generally appropriate macroeconomic policies to address the pandemic. The CCRT debt relief has facilitated FX market liquidity and has boosted external buffers in a very uncertain environment. Staff also assesses that the authorities are making credible efforts to use the financial support from the Fund to help provide 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.

CCRT debt relief for the period from January 11, 2022 through April 13, 2022 is included in projections, but its approval is subject to the adequate resources under the CCRT.