IMF grants emergency loan for Costa Rica
April 30, 2020 | Jo Bruni
Fund also approves $66 mln in rapid financing for Dominica, Grenada and Saint Lucia
Loans Debt Coronavirus Corporate & Sovereign Strategy Economy & Policy Funds Caribbean Latin America United States Haiti Jamaica Barbados Trinidad & Tobago
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The International Monetary Fund (IMF) has approved $508 million in emergency financing for Costa Rica to respond to the coronavirus pandemic, Costa Rica's central bank said on Wednesday.
The five-year loan, granted through the IMF's Rapid Financing Instrument (RFI), carries a spread of 150 basis points over the IMF's special drawing rights (SDRs), equal to an interest rate of 1.55% per year, the central bank said.
Costa Rica requested the loan when an IMF delegation visited the country on April 16-17, the central bank said.
On Tuesday, the IMF said it approved the disbursement of $65.6 million in emergency financing for Dominica, Grenada and Saint Lucia to help cover balance of payment needs during the coronavirus pandemic.
The fund granted $29.2 million to Saint Lucia, $22.4 million to Grenada and $14 million to Dominica. The three countries, all members of the Eastern Caribbean Currency Union (ECCU), requested the funds under the IMF's Rapid Credit Facility (RCF) mechanism. Grenada and Saint Lucia each received the maximum amount allowed under the RCF, while Dominica got 89.4%.
"The COVID-19 pandemic poses a major challenge to Dominica, Grenada, and Saint Lucia," Tao Zhang, deputy managing director and acting chair of the IMF executive board, said in a statement.
"The contraction in tourism is expected to have a major impact on their economies, by causing ripple effects across all economic sectors, eroding fiscal revenues, and creating urgent balance of payments pressures," he added.
The IMF expects economic activity in the Caribbean to contract 6.2% in 2020, caused by a "sudden stop" in tourism, the fund said in a report on Wednesday. "This would be the deepest recession in more than half a century," it added.
Tourism accounts for 50% to 90% of GDP and employment in some Caribbean countries with Aruba, Grenada and Saint Kitts and Nevis the most dependent.
A drop in commodity prices has affected exporters like Guyana, Suriname and Trinidad and Tobago. And recessions in the United States, Canada and the United Kingdom are hitting remittances, which average 7% of the region's economic output and exceed 15% of GDP in Haiti and Jamaica, according to the IMF.
In response, the fund recently doubled its emergency financing capacity and made available up to $2.5 billion in immediate funding for the Caribbean, it said.
Haiti received $112 million in emergency financing from the IMF on April 17. The IMF is considering emergency funding requests from three other countries in the region, including Jamaica, while Barbados has requested an addition to an existing facility.