WASHINGTON DC - The Executive Board of the International Monetary Fund (IMF) today approved a purchase of SDR108 million (about US$152.61 million) under the Rapid Financing Instrument (RFI). This is the second purchase under the RFI to Gabon since the onset of the pandemic. It aims at helping Gabon in meeting its urgent balance of payments needs. This follows the Executive Board's decision of April 9, 2020 to double temporarily the annual access limit under the RFI to 100 percent of quota (see IMF Policy Paper No. 20/018). Today's purchase brings total IMF COVID-19 support under the RFI to Gabon to US$299.61 million.
The authorities have been implementing commendable measures to limit the spread of the COVID-19 pandemic. However, since the approval of the first RFI purchase on April 9, 2020 ( see IMF Country Report No 20/109 ), weaker external demand and a more pronounced impact of containment measures have further deteriorated growth prospects and worsened external and fiscal positions. Lower domestic activity and the impact of crisis-related measures on non-oil government revenue and spending, combined with losses in oil revenue are putting significant pressures on public finances and public debt. The authorities adopted a revised budget with a larger deficit to accommodate automatic stabilizers and crisis-related emergency spending. They are also taking steps to ensure proper use of COVID-19 emergency resources, including an ex-post audit of crisis-related spending and the publication of all crisis-related procurement contracts.
Following the Executive Board discussion. Mr. Mitsuhiro Furusawa, Deputy Managing Director and Chair, made the following statement:
"The dual COVID-19 pandemic and the terms of trade shocks continue to severely affect human conditions and hamper growth prospects in Gabon. The economic contraction has deepened since the first Rapid Financing Instrument (RFI) request in April 2020, and external and fiscal positions have worsened, giving rise to additional financing needs. Public debt remains sustainable, but downside risks have increased significantly. The near-term outlook remains subject to considerable uncertainty and downside risks.
"The authorities' measures to limit the spread of the COVID-19 pandemic while safeguarding debt sustainability and improving reporting are commendable. A package of monetary easing measures was approved by the regional central bank. The Gabonese authorities adopted a revised budget focused on addressing imminent healthcare needs to save lives, protecting the most vulnerable, and supporting the private sector, notably small businesses. The revised budget contemplates a larger deficit to accommodate automatic stabilizers and crisis-related emergency measures. The authorities are also committed to further improve transparency and public financial management to ensure proper use of COVID-19 emergency resources.
"The IMF emergency assistance will support the authorities' policy response and catalyze donor support. Contingency planning as well as close monitoring of financial sector vulnerabilities also remain critical to preserve macroeconomic stability.
"The authorities' commitment to promote strong and inclusive growth over the medium term is welcome. Measures to achieve a more revenue-based and growth-friendly fiscal consolidation, enhance governance and debt management, and improve the business climate, will be critical to put public debt on a firmly downward path, and help sustain strong and inclusive growth."
Sources: Gabonese authorities; World Development indicators; and IMF staff estimates and projections.
1/ Excludes externally-financed capital expenditures.