IMF Executive Board Approves an Additional US$171.9 Million Disbursement Under the RCF to Madagascar to Address the COVID-19 Pandemic

Washington: The Executive Board of the International Monetary Fund (IMF) today approved the disbursement of $171.9 million (SDR122.2 million, 50 percent of quota) to the Republic of Madagascar under the Rapid Credit Facility (RCF). This is the second emergency disbursement since the onset of the pandemic and will help finance the country’s urgent balance of payments and fiscal needs. It follows the Executive Board’s approval of the disbursement of US$ 165.99 million on April 3, 2020 (see IMF Press Release No. 20/133 ).

This second disbursement was made possible by both the IMF Executive Board’s decision to double the annual access limit under the RCF to 100 percent of quota (see IMF Policy Paper No. 20/018), and its most recent decision on a temporary modification to the Fund’s annual PRGT access limits (see IMF Press Release No. 20/267 ). This additional disbursement brings the total IMF COVID-19 support to Madagascar to US$337.9 million.

Madagascar’s economic outlook has worsened since the approval of the first RCF request, due to a further deterioration of the global environment and a deepening of the impact of the COVID-19 pandemic, with GDP now projected to contract by 1 percent in 2020. As a result, urgent balance of payments needs arising from the pandemic have increased, with the financing gap now estimated at about US$580 million, while the fiscal situation has been severely affected by additional revenue losses and redirecting budget resources to address critical spending, including increased social assistance to the most vulnerable. The additional disbursement under the RCF will help finance health and economic relief spending under the government’s national contingency plan to fight the pandemic and continue to catalyze further support from donors. The authorities have committed to transparency and accountability to ensure that the RCF resources are used appropriately and for their intended purpose.

Following the Executive Board discussion. Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, made the following statement:

“The COVID-19 pandemic continues to severely affect key sectors of Madagascar’s economy, including tourism and export-oriented manufacturing, further weakening the macroeconomic outlook. Growth is projected to be negative in 2020 and urgent balance of payments needs arising from the pandemic have increased. Additional emergency support under the Rapid Credit Facility, following a first disbursement approved on April 3, 2020, is expected to help finance health and economic relief spending, and continue to catalyze donor support.

“In the context of a high degree of uncertainty, more support may be needed to ease the adjustment burden. The authorities’ decision to apply for the Debt Service Suspension Initiative supported by the G-20 and Paris Club, and use of the released resources to finance spending on COVID-19 related health and economic relief, is welcome.

“The authorities are implementing measures to address the humanitarian and economic impact of the pandemic while preserving macroeconomic stability. These include strengthening the health system and social protection, supporting the private sector, preserving the stability of the financial sector, and maintaining the flexible exchange rate regime.

“To ensure that the financing provided is efficiently spent on addressing the crisis, the authorities have committed to enhancing transparency, including with the publication of procurement contracts related to the response to the pandemic, and post-crisis audits.

“Madagascar’s risk of public debt distress remains moderate, but risks to the outlook are substantial. This underscores the importance of preserving fiscal sustainability once the crisis abates. The authorities remain committed, beyond their immediate response to the crisis, to continue reforms needed toward higher, more inclusive, and sustainable growth.”