São Paulo – The IMF approved on Monday (6) a new traunch of a loan to Djibouti. It has become necessary, according to the IMF, as the country was affected by the greater commodity prices and as it was also faced the crisis due to the drought in the Horn of Africa. The money will be disbursed immediately. However, Fund authorities recommend that Djibouti make an effort to increase revenues, control spending and protect investment.
The loan was approved after IMF technicians concluded the fifth evaluation of the economic performance of Djibouti in the Extended Credit Facility. This loan modality is only granted by the IMF to poor countries. It has zero interest rate and the span for payment is between five and a half and ten years. The funds will be disbursed in the form of SDRs, assets of IMF international reserves. In practice, SDRs are the IMF currency and its value is defined by a currency basket, which includes the dollar, euro, yen and pound sterling. Currently, the exchange rate for one SDR is US$ 1.54.
The 9.54 million SDR loan corresponds to US$ 14.7 million and is added to another credit, already disbursed, which corresponded to US$ 9.7 million. These funds should be used for the country to provide social assistance to the population, especially to poorer families that were affected by the sudden increase in commodity prices and fuels.
On disclosing approval of this new traunch, the deputy managing director, Nemat Shafik, said that the country was much affected by the external economic conjecture. However, she called for efforts from local authorities. “The fiscal policy must be focussed on greater revenues and control of expenses while protecting social expenses and investment,” she said.
The IMF also recommends that the country strengthen supervision and regulation of the banking system, make reforms allowing for greater competitiveness and promote the private sector. It also called for the country to restructure its state-owned energy company to reduce product costs and also government transfers to the company.
*Translated by Mark Ament
