New Delhi: The Executive Board of the International Monetary Fund (IMF) today approved the disbursement of SDR108 million (about US$147 million) to be drawn under the Rapid Financing Instrument (RFI). This will assist Gabon in meeting the urgent balance of payments needs stemming from the COVID-19 pandemic and the terms of trade shocks.
The COVID-19 pandemic and concurrent collapse in oil prices are expected to put the economy under extreme stress, particularly in a context of limited financial buffers. Economic activity will slow, and the fiscal and external positions will weaken, creating significant additional financing needs. In addition to immediate measures of containment, including border closures and curfews, the authorities are also taking significant steps to strengthen health policy responses and support households and firms.
The RFI funds will help create fiscal space for essential COVID19-related expenditure and catalyze donor support. The size and impact of the shocks is, however, subject to a considerable margin of uncertainty. The IMF continues to monitor Gabon’s situation closely and stands ready to provide policy advice and further financial support if needed, in collaboration with other donors.
Following the Executive Board discussion. Mr. Mitsuhiro Furusawa, Deputy Managing Director and Chair, made the following statement:
“The COVID-19 pandemic and collapse in oil prices have weakened the macroeconomic outlook, with the possibility that the pandemic could turn more severe and persistent than anticipated with lasting impact on commodity prices, growth, and fiscal and external positions. Economic activity would recede, and the fiscal and external positions will weaken, creating additional financing needs. In response to the shocks, the authorities have announced several containment measures including border closure, school closings and curfews. They are scaling up health care and social expenditure by reprioritizing spending, and are considering supportive measures for businesses and households. The regional Central Bank and Banking Commission are taking steps to support growth and preserve financial sector stability.
“In the short term, a temporary widening of the budget deficit is warranted to contain the virus outbreak and offset the social and economic impact of the pandemic. Additional external support will also be essential. The IMF emergency support under the Rapid Financing Instrument will support the authorities’ policy response and catalyze donor support.
“The authorities should stand ready to suspend all emergency measures once the crisis subsides. Over the medium term, public debt needs to be put back on a firmly downward path. The decline in oil prices will necessitate faster fiscal adjustment and economic diversification. Sustaining the reform momentum of recent years to achieve a more revenue-based and growth-friendly fiscal consolidation, enhance governance and debt management, and improve the business climate, will be critical.”