Roundup of IMF Statements on Disbursements to Sahelian Countries amid COVID-19

On April 15, the International Monetary Fund (IMF) approved six-month debt service relief for twenty-five low-income countries, including the Sahelian countries Burkina Faso, Chad, Mali, and Niger.

The IMF has also given disbursements to each of those countries to help offset the impact of COVID-19.

Burkina Faso ($115.3 million, approved April 14):

The immediate challenge is to contain the spread of COVID-19, strengthen medical care, implement the social distancing and other containment measures, and mitigate the socio-economic impact of the pandemic, especially on the most vulnerable.

[…]

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.

Chad ($115.1 million, approved April 14):

Due to a significant deterioration of the macroeconomic outlook and weakening of fiscal situation, urgent external and fiscal financing needs have emerged. The IMF’s support will make a substantial contribution to filling immediate external needs and preserving fiscal space for essential COVID-19-related health expenditure. It is also expected to help catalyze additional donor support.

Mali ($200.4 million, approved April 30):

This assistance will help support urgent spending on health services and assistance to affected firms and households, while preserving overall social spending.

[…]

The COVID-19 shock hit the economy hard amid an already challenging social and security situation. The economic outlook has deteriorated significantly, and growth is expected to slow to below 1 percent, increasing already high unemployment and poverty.

Mauritania ($130 million, approved April 23):

The COVID-19 pandemic is having a dramatic human, economic, and social impact on Mauritania. The short-term economic outlook has deteriorated rapidly and growth is expected to turn negative this year, with severe hardships for the population, and the outlook is subject to considerable uncertainty. These developments have given rise to urgent balance of payment and fiscal financing needs.

[…]

The IMF’s financial assistance under the RCF will provide a sizable share of the financing needed to implement the anti-crisis measures. Additional concessional and grant financing from the international community will be critical to close the remaining financing gap and help Mauritania respond effectively to the COVID-19 crisis.

Niger ($114.5 million, approved April 14):

The COVID-19 pandemic is having a pronounced negative economic impact on Niger and downside risks are significant. The economic downturn, fiscal pressures, and tightening financial conditions are giving rise to large financing gaps in Niger’s public finances and balance of payments this year.

[…]

A substantial widening of this year’s budget deficit is appropriate, reflecting unavoidable revenue shortfalls and pressing spending needs for health care, social protection, and support for hard-hit businesses.

Senegal ($442 million, approved April 13):

The Covid-19 pandemic is hitting Senegal hard. The sharp global economic downturn and domestic containment measures have led to a substantial reduction in economic activity, with sectors such as tourism, transport, construction, and retail particularly hard-hit, and the pandemic in Europe is also translating into lower remittances. As a result, the short-term economic outlook has deteriorated significantly, with large uncertainties surrounding the duration and spread of the pandemic.

 

Debt Relief for Chad

On April 29, the International Monetary Fund (IMF) and the World Bank announced $1.1 billion in debt relief for Chad under the Highly Indebted Poor Countries (HIPC) Initiative. The Initiative works by means of a two-step process that involves first, meeting certain eligibility criteria including the development of a Poverty Reduction Strategy Paper (PRSP); and second, showing progress on reforms (as determined by the IMF and the Bank) and on implementation of the PRSP. Chad has now reached the second stage, called the “completion point,” which allows a country to “receive full and irrevocable reduction in debt.” The Initiative aims to allow governments to spend more money on reducing poverty.

You can read Chad’s first (2003) PRSP here, and its second (2008) here. The second paper placed greater emphasis on alleviating rural poverty, and it responded to a context in which oil sector growth was a less dominant aspect of the economy.

You can read more about Chad and IMF here, and about the IMF’s Extended Credit Facility arrangement for Chad here. The three-year arrangement, which began in 2014, aims to “ensure fiscal sustainability, strengthen fiscal institutions and governance, promote sustained and inclusive growth over the medium term, and facilitate the move to the Highly Indebted Poor Country Completion Point.”

For the perspective of the Chadian government, you can look to this interview (French) that RFI conducted with Chadian Finance Minister Bédoumra Kordjé. RFI asks some tough questions, including whether Chad’s military participation in different conflicts in Africa (Mali, Nigeria, CAR) was part of the equation – i.e., whether the French pleaded Chad’s case to the IMF as a reward for Chad’s military assistance. Kordjé thanks the French without responding specifically to the question. Kordjé also discusses, in response to a question about late payments of salaries for Chadian bureaucrats, how the Boko Haram crisis in Nigeria and the Lake Chad region is straining Chad’s budget. You can find the 2014 budget, in French, here.

Senegal: The IMF’s Bad Advice for President Macky Sall

The International Monetary Fund (IMF) is offering some advice to Senegal that seems politically tone-deaf to me. Senegal, as of April, has a new president: Macky Sall, whose triumph over two-term incumbent President Abdoulaye Wade caused jubilation in Senegal (Sall won nearly two-thirds of the vote in the second-round runoff) and reinvigorated confidence in Senegalese democracy abroad. Sall’s victory reflected longstanding disappointment among voters, especially youth, with Wade as an individual – critics accused Wade of corruption, incompetence, and authoritarian tendencies toward the press and other opponents. But the disappointment also owed to deep complaints about economic stagnation in Senegal. Complaints touched on joblessness among youth, the country’s recurring power cuts (which hurt businesses, especially small ones), and other economic woes. Whether you agree with them or not, my impression is that many Senegalese citizens looked (and still look) to the government to take a major role in solving these problems.

The IMF, in its latest press release on Senegal, stated that IMF officials meeting with Sall’s government earlier this month had urged Senegal to cut subsidies on electricity, reduce government spending, and postpone “some non-priority capital expenditure.” Reuters sums up these developments with the headline “IMF Urges New Senegal Government to Tighten Belt,” which seems apt to me.

The IMF, in a way that reminds me a little of the debate over removing the fuel subsidy in Nigeria earlier this year, uses language that suggests government expenditures could be more efficient, and subsidies more targeted. Undoubtedly this is true. But reducing expenditures means reducing expenditures. It seems that the gains that come through “efficiency” and “targeting” are never large enough to offset the reductions represented by the overall cuts. I am not an economist and many of the economic arguments are over my head. But the politics seem simple to me: If Sall wants to stay popular, he will in the medium term need to show that he can make a difference on the economic issues that affect ordinary people’s lives; the most straightforward paths to this involve government spending on these issues, especially electricity and youth job creation. If the government tightens its belt and the economic problems continue, his popularity seems likely to fall. The youth protests that shook Senegal in 2011 and 2012 were not pro-Sall protests; they were anti-Wade, but they were also in opposition to the economic and political status quo in Senegal. I would not at all be surprised, if economic conditions for ordinary people remain stagnant, to see protests re-emerge. Finally, this is not the 1980s, but the IMF should take more cognizance of the fact that many Africans have a negative view of the IMF’s historical role on the continent, and that many of them view the IMF as not just an economic institution but a political actor.

The IMF’s Lagarde to Visit Niger and Nigeria

AFP:

International Monetary Fund managing director Christine Lagarde will visit Nigeria and Niger on December 18-22 on her first visit to Africa while leading the crisis lender, the IMF said Monday.

Lagarde will meet policymakers and representatives of the private sector and civil society to discuss challenges facing African countries, the Fund said.

A visit to African countries definitely seems due, both for Lagarde’s political standing in the region and as recognition of the continent’s economic importance. Lagarde won support from a number of African states in her bid for the IMF’s top seat earlier this year. Yet major candidates from the developing world, including former South African finance minister Trevor Manuel, were critical of how the race unfolded.

Manuel criticized a process in which European leaders lined up behind Lagarde before even knowing who else might be interested in the job, and said “the world is not at a point” at which the IMF head can be chosen solely on merit.

Nigeria and Niger seem like solid choices to me. Nigeria is unquestionably one of the continent’s economic powerhouses, while Niger is a symbol of both potential (the country recently began producing oil) and problems (food insecurity in particular).

It will be interesting to see what comes of the visit, and how the press in each country reacts.