ADDIS ABABA – The IMF has approved on Friday a 43.4 million U.S. dollars loan for Djibouti to help cushion its economy from the impact of COVID-19.
The financial support is expected to provide additional resources for essential health and other emergency spendings, including social safety nets.
The International Monitory Fund said the virus has considerably weakened near-term macroeconomic prospects for Djibouti while virus prevention measures are further affecting demand and supply.
The Fund said its executive Board approved a US$ 43.4 million loan to Djibouti to support the authorities’ response to the COVID-19 crisis.
The money will come from the Rapid Financing Instrument (RFI), which allows nations to circumvent the lengthy negotiations usually needed to secure assistance.
The Board also sanctioned a debt relief of additional $2.3 million over the next five months, and potentially increasing up to $8.2 million over the next 23 months, to the East African nation under its Catastrophe Containment and Relief Trust or CCRT.
The loan, together with the debt relief, “will provide much-needed liquidity to support the authorities’ response to the crisis”, said Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair of the board.
Djibouti’s economy is projected to contract by 1 percent in 2020 as lower exports of services and foreign direct investment open up an urgent balance of payments financing need of the order $164 million, according to the fund.
“The authorities are committed to use the additional resources transparently and to ensure that expenditures are well-targeted and cost-effective,” said Furusawa, adding that approving the loan “could catalyze further assistance from the international community”.