The Executive Board of the International Monetary Fund (IMF) on Thursday approved the disbursement of $147 million to Gabon to respond to COVID-19 economic turbulence.
The money, to be drawn under the Rapid Financing Instrument (RFI), will assist Gabon in meeting the urgent balance of payments needs stemming from the COVID-19 pandemic and the terms of trade shocks, IMF said in a statement received by TODAY NEWS AFRICA in Washington D.C.
The Rapid Financing Instrument (RFI) provides rapid financial assistance to IMF member countries facing an urgent balance of payments need. The RFI was created as part of a broader reform to make the IMF’s financial support more flexible to address the diverse needs of member countries.
IMF said the RFI funds to Gabon “will help create fiscal space for essential COVID19-related expenditure and catalyze donor support”, adding that the size and impact of the shocks would, however, be subject to “a considerable margin of uncertainty.”
“The COVID-19 pandemic and collapse in oil prices have weakened the macroeconomic outlook, with the possibility that the pandemic could turn more severe and persistent than anticipated with lasting impact on commodity prices, growth, and fiscal and external positions,” said Mr. Mitsuhiro Furusawa, IMF Deputy Managing Director and Board Chair.
“Economic activity would recede, and the fiscal and external positions will weaken, creating additional financing needs. In response to the shocks, the authorities have announced several containment measures including border closure, school closings and curfews. They are scaling up health care and social expenditure by reprioritizing spending, and are considering supportive measures for businesses and households. The regional Central Bank and Banking Commission are taking steps to support growth and preserve financial sector stability.
“In the short term, a temporary widening of the budget deficit is warranted to contain the virus outbreak and offset the social and economic impact of the pandemic. Additional external support will also be essential. The IMF emergency support under the Rapid Financing Instrument will support the authorities’ policy response and catalyze donor support.
“The authorities should stand ready to suspend all emergency measures once the crisis subsides. Over the medium term, public debt needs to be put back on a firmly downward path. The decline in oil prices will necessitate faster fiscal adjustment and economic diversification. Sustaining the reform momentum of recent years to achieve a more revenue-based and growth-friendly fiscal consolidation, enhance governance and debt management, and improve the business climate, will be critical,” Furusawa added.