IMF approves a US$120.9 million disbursement to the Kyrgyz Republic to address the COVID-19 pandemic

IMF approves a US$120.9 million disbursement to the Kyrgyz Republic to address the COVID-19 pandemic

The Executive Board of the International Monetary Fund (IMF) approved a purchase of the Kyrgyz Republic under the Rapid Financing Instrument (RFI) equivalent to SDR 59.2 million (US$ 80.6 million) and a disbursement under the Rapid Credit Facility (RCF) equivalent to SDR 29.6 million (US$ 40.3 million) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.

This is the first IMF emergency loan under the RFI/RCF worldwide since the outbreak of the pandemic.

The outbreak of the pandemic has weakened the macroeconomic outlook for the Kyrgyz Republic and opened a balance of payments gap estimated at about US$400 million. There is an unprecedented high level of uncertainty surrounding this projection. The IMF support helps provide a backstop, increase buffers, and shore up confidence for the Kyrgyz economy. It also helps catalyze donor support and preserve fiscal space for essential COVID-19-related health expenditure.

To absorb the shock of the pandemic, the government is appropriately implementing a temporary loosening of macroeconomic and financial policies.

Following the Executive Board discussion. Ms. Kristalina Georgieva, Managing Director and Chair, made the following statement:

“The COVID-19 pandemic has been hitting the Kyrgyz economy very hard and created an urgent balance of payments need. All sectors are being impacted with extreme severity as measures are being taken to stop the spread of the virus.”

“Given the unprecedented high level of uncertainty, IMF emergency support under the Rapid Financing Instrument and the Rapid Credit Facility helps provide a backstop and increase buffers and shore up confidence. It also helps to preserve fiscal space for essential COVID-19-related health expenditure and catalyze donor support.”

Banks’ capital and liquidity buffers need to be used to absorb credit losses and the liquidity squeeze. Once these buffers are exhausted, the central bank needs to show flexibility on the timing of bringing capital and liquidity above the minimum required, considering the length of the crisis.

Expeditious donor support is needed to close the remaining balance of payments gap and ease the adjustment burden.

Original source: IMF
Published on 26 March 2020