The Board of
Directors of the African Development Fund (ADF) on Wednesday approved a UA100.4
million (about $138 million) crisis budget support package to four southern
African countries – Malawi, Madagascar, Mozambique and São Tomé & Príncipe,
in the wake of the COVID-19 pandemic.
Under the package, known as the Multi-Country COVID-19 Response Support Program (MCRSP), Malawi will receive a concessional loan of UA17.87 million and a grant of UA15.03 million; Madagascar, a concessional loan of UA30 million; Mozambique, a combined grant of UA30 million; and São Tomé & Príncipe, a grant of UA7.5 million. The programme is financed through African Development Fund resources, the concessional window targeting low income countries, and was made possible by the robust backing of Bank shareholders to its 15th replenishment, which came into effect this month.
The package will support the national actions of the four countries in mitigating the impact of COVID-19, with the overall objective of protecting lives and livelihoods. The package of policy measures agreed with Government include strengthening health systems to cope with the surge in hospitalisations and scaling up testing and tracing systems; expanding social protection systems to cushion its most vulnerable populations; and to provide cash relief to Micro, Small and Medium Enterprises(SMEs).
Special emphasis has been put in protecting food systems and supporting agriculture producers. Specific measures in each country reflect national response plans and the institutional and economic characteristics of each, and are underpinned by clear arrangements to ensure transparency and accountability in the use of resources.
Like most of Africa, low testing capacity in Malawi, Madagascar, Mozambique and São Tomé & Príncipe means that recorded cases might understate the extent of COVID-19, and make it difficult to plan for a safe re-opening of the economies. In addition, government containment measures, while necessary to slow down the infection, are having a direct negative effect on the economy and society, notably with disruption of trade and declaration of state of emergencies, closure of schools, universities and places of business.
Prior to the pandemic, growth outlook in all the four countries had been favorable, driven by exports and tourism. With the onset of COVID-19 the economies of all four countries have been severely hit. The economic recession is hitting the poorest households and informal sector hardest as food prices have soared, and spiraling job cuts. The shutdown of borders has disrupted trade patterns and supply chains, hitting SMEs the worst and putting pressure on food systems.
The response, which aligns with the ADF-15 strategic priority of building resilience to economic shocks, is underpinned by each country’s COVID-19 response strategy that gives a high priority to health, social protection and economic stimulus. It also aligns with the Bank Group’s COVID-19 CRF Ten-Year Strategy 2013-2022; the Bank’s “Improving the Quality of Life of the People of Africa” High 5 strategy; and the countries’ Country Strategy Papers.
Dr Josephine Ngure, Bank Acting Director General for Southern Africa, said, “We are delighted with the approval of this crucial cash injection to support the COVID response plans in Madagascar. Mozambique, Malawi and Sao Tome. During this unprecedented challenge, it is essential that Governments in the region act in a coordinated manner to protect the most vulnerable in society and set the foundation for a speedy post-pandemic recovery. The Bank will continue to work with member countries to monitor epidemiological and economic trends and support the right policies”.
The proposed operation has been coordinated with key development partners in each country, including the United Nations, the European Union, the Department for International Development, the French Development Agency, the International Monetary Fund, and the World Bank.