The IMF Rapid Credit Facility and Debt Relief Under the Catastrophe Containment and Relief Trust-CCRT comes as a loan to Djibouti authorities to support their response to the COVID-19 crisis. It equally comes as a debt relief under the CCRT, which will generate additional resources of US$ 2.3 million over the next five months, and potentially up to US$ 8.2 million over the next 23 months.
Among other things, this will help Djibouti meet the urgent balance of payment needs stemming from the COVID-19 pandemic. As one of the countries that has greatly felt the macro economic impact of the pandemic due to a drastic reduction in external demand for their products
due to the global recession. This move is timely to enable the economy stay on track.
Domestically, virus prevention and containment measures are further affecting demand and supply. Output is projected to contract by 1 percent in 2020 and lower exports of services and foreign direct investment have opened up an urgent balance of payments financing need of US$ 164 million.
“The COVID-19 pandemic is having a severe impact on Djibouti, creating urgent balance of payments and fiscal financing needs. The authorities acted swiftly to contain and mitigate the spread and impact of the virus. Their prevention and containment measures and decisions to scale up health and other emergency spending to protect households and firms hit by the crisis will help limit economic and social consequences.
“The crisis and policy response will lead to a widening of the fiscal deficit this year. The IMF’s emergency financing under the Rapid Credit Facility and debt service relief under the Catastrophe Containment and Relief Trust 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. The authorities are committed to use the additional resources transparently and to ensure that expenditures are well-targeted and cost-effective.
“Once the crisis abates, temporary measures should be unwound, with policies refocusing on promoting a strong and inclusive recovery and preserving medium-term debt sustainability. It will be critical to address and prevent the recurrence of external arrears, ramp up operations of key projects, and reduce public sector borrowing. Reducing tax expenditures will also be important to create space for poverty-reducing spending. Efforts to strengthen banks’ balance sheets, enhance the business environment, and improve the governance and efficiency of public enterprises will be essential to foster strong and inclusive growth.” Said
Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair after the decision.