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bne May 2020 Cover story I 37
in an IMF statement. According to Zhang, the two consecutive shocks are expected to create large fiscal pressures and an urgent balance of payments need amid a tightening of global financial conditions.
Bosnia & Herzegovina
The leaders of Bosnia & Herzegovina’s three main ethnic parties and the state authorities have reached an agreement on the spending of a much-needed €330mn loan from the IMF, clearing the last condition imposed by the international institution in order to approve the sum.
The aid is part of the IMF's programme to help governments worldwide to tackle the coronavirus (COVID-19) outbreak and its economic consequences. Bosnia has been in a state of emergancy since March 17, and the number of reported cases of coronavirus reached 984 on April 12.
Although the aid was proposed by the IMF, it has warned that it will halt this assistance if the authorities undermine the country’s currency arrangement.
Earlier in April, Prime Minister Zoran Tegeltija asked IFIs for at least €600mn in joint aid to support the country's economy and healthcare system as the coronavirus crisis unfolds.
Kosovo
The IMF approved €51.6mn on April 10, or 50% of its quota, in emergency support for Kosovo to meet urgent balance of payment needs stemming from the coronavirus (COVID-19) pandemic.
The funds, provided under the Rapid Financing Instrument (RFI), are aimed at responding effectively to the coronavirus by strengthening healthcare and mitigating the effects on the sectors and households most affected by the crisis.
The IMF is projecting that the coronavirus pandemic will hit Kosovo’s economy hard. GDP is projected to contract by 5% in 2020 as tourism receipts, remittances, exports of goods, and FDI will decrease due to travel
restrictions and the effect of COVID-19 on its trading partners and remittance- originating countries.
The deteriorated economic outlook is expected to result in external and fiscal financing gaps, the IMF noted.
Moldova
The Moldovan authorities have asked
for emergency financial assistance
to mitigate the economic impact of
the coronavirus pandemic. An IMF mission held discussions from the
fund’s headquarters in Washington on March 30-April 1 on economic policies appropriate for addressing the impact of the pandemic under the combined Rapid Credit Facility and Rapid Financing Instrument.
The financing might reach $117mn
(1% of the country's GDP), the fund said – which is important but far from sufficient to finance the country's public deficit, which is likely to surpass 5% of GDP in 2020. The unexpected financing needs as estimated by President Igor Dodon would be around €300mn. Separately, €200mn of financing promised by Russia, although confirmed recently by Dodon, is uncertain and might create additional pressures, since the money has already been included
in the budget.
North Macedonia
The IMF has approved a disbursement of SDR140.3mn (about €176.53mn), which is 100% of the quota for North Macedonia to support financing health and macroeconomic stabilisation measures.
Skopje expects budget revenues to drop by 20% to 40% in 2020 compared to last year, according to its three scenarios drawn up in light of the coronavirus crisis. On the expenditure side, the government is redistributing funds to cover the increased needs of the health sector, as well as the measures to be taken to cushion the impact on the economy.
Tao Zhang, IMF deputy managing director and acting chair, said that North Macedonia’s economic outlook has deteriorated substantially as a result of the epidemic and that real GDP is seen falling by 4% in 2020 due to a drop in both domestic and external demand.
"This, together with negative shocks to confidence and spillovers from global financial channels, has created an urgent balance of payments need,” Zhang said in the statement.
Romania
Seeking a new IMF agreement has been discussed in Bucharest, but this is off the table for now, Finance Minister Florin Citu said on April 1. The government is wary about seeking IMF support after its previous experience of austerity following the economic crisis of 2009. According to Citu, the government will first tap the local market to finance the budget deficit, which is expected to widen this year, and only afterwards rely on the IMF and the European Bank for Reconstruction and Development (EBRD) under arrangements that would not include conditions such as structural reforms or performance targets.
South Caucasus
Looking at the South Caucasus, the
IMF has reached an agreement with
the Armenian government under an existing programme for a funding hike of around $175mn, subject to approval by its executive board. Also, on April 14, Georgian PM Giorgi Gakharia said Tbilisi had completed negotiations with the IMF for assistance of $447mn. According to local reports, $200mn of the IMF loan will go to the government, while the
rest will flow to the National Bank of Georgia to help the central bank support its foreign exchange reserves. The central bank previously said there was no doubt the country was set to raise
“a significant amount of money” from the Fund. Georgia asked the IMF to increase its funding in the framework
of the EFF programme, which last December was extended by one year until April 2021.
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