- The International Monetary Fund (IMF) has completed the first review under the Poverty Reduction and Growth Facility (PRGF) arrangement with Djibouti, thereby immediately qualifying the country for the disbursement of US$ 2.3 million.
“The completion of the review enables the immediate disbursement of SDR 1.476 million (about US$ 2.3 million), bringing the total amount disbursed under the program to SDR 5.34 million (US$ 8.2 million),” the IMF announced yesterday in a statement.
The statement also said the Board of the Fund also approved the authorities' request for four waivers of nonobservance of performance criteria, and modification of performance criteria, saying the approval was because the non-observance was minor, relating to the delay in the submission of the VAT law, temporary accumulation of external arrears, and on the grounds of implemented corrective actions.
“These include the implementation of a single treasury account and the strengthening of administrative procedures to avoid an accumulation of new arrears to domestic public and private providers (for the accumulation of domestic arrears), and preventive measures to reduce the vulnerability of electricity supply, including by strengthening the financial position of the electricity company through reducing public arrears,” explained the statement.
In a statement issued by Murilo Portugal, Deputy Managing Director and Acting Chairman, he stated: “The implementation of the main monetary and fiscal measures envisaged under the PRGF-supported programme has helped Djibouti sustain high economic growth and bring down inflation to single digits. Nevertheless, programme implementation has been hampered by, among other things, weaknesses in administrative capacity, and the authorities are giving high priority to addressing such weaknesses.”
Mr Portugal said Djibouti’s adherence to the programme’s medium-term macroeconomic policies will be crucial, further adding that the observance of the fiscal consolidation path is particularly important.
“In order to strengthen Djibouti’s fiscal and debt sustainability, additional revenue and expenditure measures are being implemented in 2009. The introduction of a value added tax, the broadening of income taxation, the suspension of patent exemptions for foreign direct investment, and an increase in non-tax revenues related to the resumption of fees on imported oil will contribute to strengthen the country’s revenue performance,” Mr Portugal said.
He also said the main expenditure measures, such as a freeze on public sector salaries and recruitment, except in health and education, and reinforced control of nonessential current expenditure, were unavoidable to achieve the necessary fiscal consolidation, while allowing for an increase in poverty-related spending.
He further said every effort should also be made to improve the terms of the country’s financing, including by concluding bilateral agreements with Paris Club and non-Paris club creditors, seeking highly concessional assistance, and strengthening current debt management practices.
“Financial stability will be further strengthened with the help of IMF technical assistance. The central bank plans to upgrade its banking supervision and crisis prevention capacity. Accelerating the implementation of structural reforms to lower production costs, strengthen public utilities, and improve the investment climate is also crucial to enhance Djibouti’s competitiveness and reduce external vulnerabilities,” Mr Portugal said.
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