IMF approves $411 mln in emergency assistance to Ethiopia

0
1079

The International Monetary Fund (IMF) executive board approves USD 411 million in emergency assistance to Ethiopia to address the COVID-19 pandemic challenge besides relief on debt service of USD 12 million.
Recently Ahmed Shide, Chair of Economic Affairs Subcommittee for COVID 19 pandemic and Minister of Finance, disclosed that the government has finalized a negotiation with the Fund to get the finance that will be direct budget support and support the balance of payment that is affected by low economic activity due to the outbreak of coronavirus.
In its statement IMF said that Ethiopia is facing a pronounced economic slowdown and an urgent balance of payments need owing to the COVID-19 pandemic.
“To address this urgent need, the IMF approved USD 411 million emergency assistance for Ethiopia under the Rapid Financing Instrument (RFI),” it said.
The country will also benefit from IMF debt service relief under the Catastrophe Containment and Relief Trust (CCRT), according to the statement of IMF.
The Executive Board also approved a rephasing of disbursements under the Extended Credit Facility (ECF) and Extended Financing Facility (EFF) arrangements that have been supporting Ethiopia’s economic reform program since December 2019, and a reduction in access under the EFF arrangement, to maximize financial support under the RFI.
The IMF Executive Board decision was to provide debt service relief to the poorest and most vulnerable countries that are eligible for grant assistance under the CCRT.
“As a result, the Board approved Ethiopia’s request for relief under the CCRT on debt service falling due to the IMF until October 13, 2020 of about USD 12 million. This relief could be extended up to April 13, 2022, subject to the availability of resources under the CCRT,” it added.
The statement that understood the COVID-19 pandemic has created severe health risks and weighed heavily on the Ethiopian economy, says “if the pandemic is not contained, it will put severe pressure on the health system with devasting social consequences.”
It said on the economic front, a fall in demand for exports, combined with domestic containment measures will slow growth and weaken external and fiscal accounts.
The IMF statement appreciated the government’s action to contain the public health and COVID 19 impacts by taking several measures like state of emergency, mandatory quarantine travelers entering to the country, improving testing, providing supports for poor and others.
“The IMF continues to monitor Ethiopia’s situation closely and stands ready to provide policy advice and financial support as needed,” it added.
“Ethiopia showed good progress under the extended arrangements with the Fund, which aim to address external vulnerabilities and transition to a private sector-led growth model. The authorities remain committed to the reform program. However, the COVID-19 pandemic has had a significant adverse impact on the economy and created urgent fiscal and balance of payments needs. The authorities have moved decisively to contain the spread of the virus and manage the economic fallout from the global downturn and the needed health-related measures,” Tao Zhang, Deputy Managing Director and Chair of the Executive Board, said.
“A temporary widening of the budget deficit is appropriate. The immediate priority is to increase spending on health care and provide emergency assistance, including food assistance. The authorities are committed to full transparency on the spending for the emergency response and aim to conduct an ex-post audit of crisis-related spending once the crisis abates. Fiscal consolidation will need to resume after the crisis, with a focus on strengthening debt sustainability and domestic revenue mobilization,” Tao Zhang added.
The government has been disclosed that in general the government is working to mobilize USD 2.15 billion for sectoral, budget and other areas support that is expected to get from international partners.
It has also said that it is negotiating with the World Bank to get USD 725 million fresh supplementary budget support.