São Paulo – The International Monetary Fund (IMF) on Friday (8) approved a disbursement equivalent to USD 43.4 million to help Djibouti meet the balance of payment needs stemming from the coronavirus pandemic. The balance of payments is the record of all economic transactions between a country and the rest of the world, including imports, exports and financial transactions.
The IMF also approved grants of USD 10.5 million to relieve debts. According to the latest figures from the World Health Organization (WHO), the North African Arab country recorded 1,210 cases of COVID-19, including three deaths. Pictured above, professionals of Djibouti’s Ministry of Health ready to apply COVID-19 tests.
According to IMF, the pandemic has considerably weakened near-term macroeconomic prospects for Djibouti, which is facing a negative external demand shock due to the global recession. Domestically, COVID-19 prevention measures are further affecting demand and supply.
The IMF believes that lower exports of services and foreign direct investment have opened up an urgent balance of payments financing need of the order of USD 164 million. The pandemic has also created urgent spending needs, including in the health sector, and is set to affect government revenue.
Following an executive board discussion, IMF deputy managing director Mitsuhiro Furusawa stated that Djibouti’s authorities acted swiftly to contain and mitigate the spread and impact of the virus and that their prevention measures to protect households and firms will help limit economic and social consequences stemming from the pandemic.
According to him, the pandemic and policy response will lead to a widening of the fiscal deficit this year, though. The IMF’s emergency financing will provide some liquidity to support the authorities’ response to the crisis together with further assistance from the international community.
Furosawa stated that, once the crisis abates, temporary measures should be unwound to promote a strong and inclusive recovery and preserve medium-term debt sustainability and reduce borrowing. “Reducing tax expenditures will also be important to create space for poverty-reducing spending, the executive said. He also suggested efforts to strengthen banks’ balance sheets, enhance the business environment, and improve the governance and efficiency of public enterprises.
Translated by Guilherme Miranda
