When will African countries pay back IMF Covid-19 loans?

The International Monetary Fund (IMF) noted on its website that it has “responded to the coronavirus with unprecedented speed and magnitude of financial assistance to help countries, notably to protect the most vulnerable and set the stage for economic recovery.”

According to the IMF’s inquiries page, it has so far committed “over $285 billion,” or a quarter of its $1 trillion lending capacity, to support member states’ economies during the Covid-19 pandemic and subsequent recovery. Since March 2020, it has approved “one third” or about $94 billion in financing for 80 countries.

These funds have largely come in the form of emergency disbursements through the IMF’s Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI). Both financing tools are used to support emergency balance of payments needs – and don’t require “additional conditionality after program approval”.  The RCF pertains to poverty reduction while the RFI can be used more broadly. The other bulk of emergency and “precautionary” lending has come from the Flexible Credit Line (FCL), though as of May 2020, just five countries had used it: Chile, Colombia, Mexico, Peru, and Poland.

Kristalina Georgieva Photo: Philipp Naderer 
Kristalina Georgieva Photo: Philipp Naderer

In Africa, the IMF has approved a total of about $16.3 billion and SDR 11.8 billion (Special Drawing Right, a supplementary reserve asset) to 40 African countries. Although the IMF had previously approved funding to it in May, Benin was the last country to be approved emergency funding on December 21, 2020.  

On the question of when these loans will need to be repaid, the RFI “should be repaid within 3¼ to 5 years”. Depending on the circumstances – “an exogenous shock” or if a country has a history of sound economic management – the RFI can also be used repeatedly “within any three-year period,” potentially extending the repayment period.

The RCF, meanwhile, “carries a zero interest rate, has a grace period of 5½ years, and a final maturity of 10 years.” This means countries wouldn’t be penalized for missed payments within the grace period. In general, the repayment timeline also depends on when funding was approved; furthermore, as in Benin’s case, many countries have utilized multiple tools such as RCF, RFI, and an augmentation of an ECF– best to look at each country’s programs.

The IMF also notes that depending on where a country is in its economic recovery, it may seek to access other financial tools; for example, in shifting from a Flexible Credit Line to Short-term Liquidity Lines, to build resilience to future shocks.

In sub-Saharan Africa, the region is “not expected to recover to 2019 levels until 2022.” It has already experienced its worse fall in productivity on record, and it’s predicted to “recover modestly” in 2021. There are a number of risks, however, to this recovery: “path of the pandemic, resilience of health institutions, and availability of external financing – particularly private.

Concerning debt relief, the IMF is not permitted, under its charter, to forgive any debt; however, it can service debt relief through grants from donors, which it has done through its Catastrophe Containment and Relief Trust (CCRT). Out of the 25 countries that received debt service relief in April 2020, 20 were in sub-Saharan Africa.

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