Washington (United States) (AFP) – The International Monetary Fund on Thursday announced it was stepping up financial support for at least four African countries to help them manage the economic fallout of the US-Israel war on Iran. IMF chief spokesperson Julie Kozack told reporters in Washington that the multilateral lender would provide increased or accelerated access to funds to Ethiopia, The Gambia, and Burkina Faso. The Fund was also in “accelerated” talks with Malawi on a new IMF financial assistance program.
The war has plunged the Middle East into violence, with Tehran’s retaliatory action sending global energy prices skyrocketing after it virtually blockaded the key Strait of Hormuz. The move has also blocked supply chains for fertilizers, causing food security concerns across the world and particularly in Africa, where many countries are dependent on imports from the Middle East.
In Ethiopia, the IMF’s staff will propose to its board accelerated access to a $200 million tranche of an existing loan to the government. Ethiopia has an ongoing $3.4 billion program, with a $468 million tranche cleared for release this week. In The Gambia, authorities have requested a 20 percent augmentation of their existing $172 million program, Kozack said, with a six-month extension and rephasing of access also in the cards.
In Burkina Faso, the IMF has reached an agreement with authorities on increasing the size of the country’s program by $51 million, in part to ease balance of payments concerns caused by higher fertilizer import prices. At the IMF’s Spring Meetings this year, the organization’s chief Kristalina Georgieva highlighted that the war had caused it to reduce its global growth forecast. She estimated that vulnerable economies would need between $20-50 billion in financial assistance due to the economic fallout of the conflict.
On Thursday, IMF spokesperson Kozack said economic disruptions due to the war — including higher commodity prices and supply chain issues — were beginning to show up in macroeconomic data. “There are also indications, as we discussed, that the shock is feeding into inflation; short-term inflation expectations have risen,” she said. Kozack said the shock was having an “asymmetric impact,” with some developed economies and oil-exporting countries relatively cushioned while others were struggling to manage rising import bills.
“Not all countries are benefiting from robust tech investment,” she said. “Some countries are hit harder by the war than others. We’re particularly concerned about energy importing countries that are vulnerable or have weaker fiscal space.” Developed economies were not immune from the effects. The effects of the war had forced the IMF to delay its timeline for US inflation returning to the Federal Reserve’s two-percent target to late 2027, from a previous expectation of mid-2027, she said.
© 2024 AFP
