Washington, DC — The Executive Board of the International Monetary Fund (IMF) today approved a disbursement of SDR 84.28 million (about US$115.3 million or 70 percent of its SDR quota) for Burkina Faso under the Rapid Credit Facility (RCF). The financing provided under the RCF will help finance the health, social protection and macroeconomic stabilization measures, meet the urgent balance of payments needs arising from the COVID-19 outbreak and catalyze additional support from the international community.
The economic impact of the COVID-19 pandemic in Burkina Faso is rapidly unfolding, with the short-term outlook worsening quickly. The pandemic comes at a time when Burkina Faso was already gripped by a heightened security crisis. The authorities responded by putting in place measures to help contain the spreading of the virus, including by closing schools and universities, banning mass gatherings, and suspending international travel. Though absolutely needed to contain the outbreak these measures, together with the global response, have significantly worsened the economic outlook in the near term, with real economic growth declining substantially, and both the fiscal and balance of payments deficits widening significantly.
Burkina Faso has also benefited from the IMF Executive Board decision of April 13, 2020 to provide debt service relief to all countries eligible for support from the International Development Association (IDA) in the form of grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT). As a result, Burkina Faso will receive relief from the CCRT on debt service falling due to the IMF in the next 6 months (about US$11.9 million). This relief could be extended for up-to 2 years, subject to the availability of resources under the CCRT.
The IMF continues to monitor Burkina Faso's situation closely and stands ready to provide policy advice and further support as needed.
Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following statement:
"Burkina Faso has been adversely impacted by the COVID-19 pandemic. The near-term economic outlook has deteriorated quickly, compounding existing challenges posed by the security crisis in the Sahel region and the associated high number of internal displacements and humanitarian assistance needs. The authorities' measures to contain and mitigate the socio-economic fallout of the pandemic have given rise to substantial and urgent fiscal and balance of payments needs. With uncertainties surrounding the duration and scope of the pandemic, the fallout could intensify further. The IMF emergency support under the Rapid Credit Facility will provide much-needed resources to support the authorities' response to the crisis and help catalyze further donor support.
"A widening of the fiscal deficit in 2020 is warranted to create room for health care spending, social safety nets and for the mitigation of the economic impact of the shocks. Prioritized, well-targeted and cost-effective spending would be critical. Fiscal measures introduced as a response to the shocks should also be temporary to ensure medium-term debt sustainability. Once the impact of the COVID-19 pandemic has abated, fiscal policy should be rebalanced toward a more growth-friendly composition, including scaling down current transfers to increase space for domestically financed development spending.
"Additional external support, preferably in the form of grants, is urgently required to meet Burkina Faso's elevated financing needs, ease the financial burden of the pandemic and preserve recent macroeconomic stability and development gains."