The Executive Board of the International Monetary Fund (IMF) today approved a disbursement under the Rapid Credit Facility (RCF) equivalent to SDR 122.2 million (about US$ 165.99million at today’s US$/SDR exchange rate, or 50 percent of the quota) to help the country meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
The Covid-19 pandemic is having a severe impact on Madagascar’s economy. Tourism is facing a dramatic decline, and disruptions are occurring to mining and manufacturing exports, as well as in trade and investment.
To mitigate the shock of the pandemic, the government is taking appropriate immediate actions including immediate fiscal measures to strengthen social protection and support the most vulnerable such as through government donations of staple foods; suspending fees and social contributions to support the private sector; and providing liquidity to preserve the stability of the financial sector. However, the weakened macroeconomic outlook and deteriorating fiscal situation have created urgent external and fiscal financing needs. The IMF support will make a substantial contribution to filling immediate external needs and preserving fiscal space for essential COVID-19-related health expenditure. It is also expected to help catalyze additional donor support.
Following the Executive Board discussion. Mr. Mitsuhiro Furusawa, Deputy Managing Director and Chair, made the following statement:
“The Covid-19 pandemic is having a severe impact on Madagascar’s economy. Due to dramatic declines in tourism and disruptions to manufacturing and extractive industry exports, as well as transport, communications, and services, real GDP growth is likely to decline sharply. The fiscal situation is also deteriorating rapidly with additional health and social spending outlays and a significant shortfall in tax revenue. Fund support under the Rapid Credit Facility will help the authorities meet the urgent fiscal and external financing needs to mitigate the impact of the pandemic.
“The authorities are taking immediate measures to address the human and economic impact of the pandemic, while preserving macroeconomic stability. These include increases in health spending, help to the most vulnerable, support to the private sector, and actions to preserve the stability of the financial sector and maintain the flexible exchange rate regime.
While the risks to the outlook are substantial, given the high degree of uncertainty, Madagascar continues to be assessed at low risk of external debt distress. Beyond the immediate response, the authorities remain committed to economic policies that will ensure sustained and inclusive growth over the medium-term.
“Additional donor support, beyond that which was already committed before the outbreak of the pandemic, is needed to close the remaining balance of payments gap and ease the fiscal situation.”