IMF Executive Board Approves for Senegal a US$442 Million Disbursement Under the Rapid Credit Facility and Purchase Under the Rapid Financing Instrument
New Delhi: The IMF Executive Board approves the tenth request for emergency financial assistance to help its member countries address the challenges posed by COVID-19.
The approval of the request from Senegal will make available US$442 million to be drawn under the Rapid Credit Facility and the Rapid Financing Instrument and will provide much-needed liquidity to support the authorities’ response to the crisis.
The economic impact of the COVID-19 pandemic is rapidly unfolding, with the near-term outlook deteriorating quickly.
The authorities have acted fast by putting in place strong measures to help contain the spread of the disease and mitigate the pandemic’s impact on the economy.
The Executive Board of the International Monetary Fund (IMF) today approved the purchase under the Rapid Financing Instrument (RFI) equivalent to SDR 215.7 million (about US$294.7 million, 67 percent of quota) and a disbursement under the Rapid Credit Facility (RCF) equivalent to SDR 107.9 million (US$147.4 million, 33 percent of quota) to help Senegal meet the urgent balance of payment needs stemming from the COVID-19 pandemic.
The Covid-19 pandemic is hitting Senegal hard. The sharp global economic downturn and domestic containment measures have led to a substantial reduction in economic activity, with sectors such as tourism, transport, construction, and retail particularly hard-hit, and the pandemic in Europe is also translating into lower remittances. As a result, the short-term economic outlook has deteriorated significantly, with large uncertainties surrounding the duration and spread of the pandemic.
The authorities have acted fast to mitigate the impact of the pandemic by increasing health spending and providing targeted support to vulnerable households and firms, including trough food aid, suspension of utility bills, and targeted tax relief. IMF financing will help preserve fiscal space and catalyze further assistance from the international community, preferably in the form of grants.
The IMF continues to monitor Senegal’s situation closely and stands ready to provide policy advice and further support as needed.
Following the Executive Board’s discussion of Senegal, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following statement:
“The COVID-19 Pandemic is having a severe impact on Senegal, creating an urgent balance-of-payments and fiscal financing need. To mitigate the impact of the pandemic, the authorities have acted fast by increasing health spending and providing targeted support to vulnerable households and firms, including through food aid, suspension of utility bill payments for the poorest, and targeted tax relief.
“The IMF’s emergency financing under the Rapid Credit Facility and the Rapid Financing Instrument will provide much-needed liquidity to support the authorities’ response to the crisis and could catalyze further assistance from the international community, preferably in the form of grants.
“A temporary widening of the budget deficit is appropriate to mitigate the health and economic impact of the pandemic. It is also advisable that macroeconomic policies continue to be guided by the objectives of the current Policy Coordination Instrument (PCI) to the extent possible. Once the crisis abates, a gradual return to the budget deficit target of 3 percent of GDP, in line with regional fiscal rules, is necessary to preserve external and debt sustainability.
“Additional concessional donor support will be critical to close the remaining financing gap, ease the adjustment burden, and preserve Senegal’s impressive economic achievements. Ensuring that disbursed funds are used in a well-targeted, cost-effective and transparent manner remains imperative.”