IMF relieves East Africa’s indebted states with $1.9 billion financing deals

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The International Monetary Fund (IMF) board has approved the payment of $620.65 million in budgetary support for Rwanda, Tanzania, and the Democratic Republic of Congo (DRC) as part of the $1.92 billion financing commitments which the Washington-based institution agreed with six East African nations in the past six months.

The deals have come as a relief for the six countries (the others are Somalia, Burundi, and Kenya), which are saddled with debts, a situation made worse by falling revenue collections, declining forex reserves, and depreciating currencies.

The IMF funding, which is pegged on the implementation of key socioeconomic and governance reforms by the recipient countries, is aimed at helping them deal with the persistent budget deficits and shore up the flagging foreign exchange reserve positions.

In the past two weeks, the fund’s board approved the disbursement of $150.5 million, $268.05 million, and $ 202.1 million for Tanzania, Rwanda, and the DRC respectively.

For Tanzania, the funding is part of the $1.04 billion Extended Credit Facility (ECF) that was approved by the IMF board in July 2022. The approval of Dodoma’s funding followed the completion of the programme’s second review, bringing Tanzania’s total access under the arrangement to $455.3 million.

The IMF mooted the 40-month financing package to help bolster Tanzania’s economic recovery, address the spillover effects from Russia’s invasion of Ukraine, help preserve macroeconomic stability, and support structural reforms toward sustainable and inclusive growth, drawing on the government’s priorities.

Structural reform
“Most end-June 2023 quantitative performance criteria and indicative targets were met,” the IMF said in a statement on December 13.

Read: IMF board okays $150.5m budgetary support for Tanzania

“The authorities’ structural reform agenda is progressing well, with all end-June 2023 structural benchmarks completed on time, reflecting their commitment to the reform agenda.”

For Rwanda, the IMF Board, on December 14, approved a new 14-month credit facility arrangement worth $268.05 million, out of which Kigali can access $138.84 million immediately.

The agreement falls under the fund’s stand-by credit facility (SCF) and resilience and sustainability facility (RSF).

The Board’s decisions allowed for an immediate disbursement equivalent to $49.49 million under the RSF, and $89.35 million under the SCF.

The fund noted that Rwanda’s economic growth remained robust, but macroeconomic imbalances have intensified, adding that policy space to advance developmental objectives has been constrained by diminished policy buffers repeated droughts, and the severe floods in May 2023.

On the same day (December 14), the IMF Board completed the fifth review under the ECF arrangement with the DRC, allowing for an immediate disbursement of $202.1 million towards international reserves, to continue building buffers.

This came soon after IMF and the Somalia authorities reached an agreement on key economic and financial policy reforms which saw Mogadishu get a huge debt relief and an additional $100 million financing under a three-year Extended Credit Facility (ECF) arrangement.

For Burundi, the IMF board on July 17, 2023, approved a 38-month arrangement under the ECF with access of SDR 200.2 million (or $261.7 million).

In November, the IMF staff reached an agreement with Kenya, for an expanded $938 million financing. The funding, which still requires IMF board approval in January, would result in the fund granting Kenya immediate access to around $682 million

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