The African Development Bank on Friday approved grants worth about $41.16 million to Djibouti to bolster the national budget in support of government efforts to mitigate national and regional impacts of the COVID-19 pandemic.

The funding will take the form of an African Development Fund grant for $4.12 million and a $37.04 million grant from the Bank’s Regional Operations Envelope. The Bank is providing the funding under its COVID-19 Response Facility.

“It is the first time the Bank is leveraging the Regional Operations resources for a budget support operation. This approach was pertinent to ensure that Djibouti has adequate resources to contain the spread of the COVID-19 pandemic in its territory and limit cross-border impacts that pose serious risks for health, social and economic development for the country and ensure adequate controls at territorial borders and all points of entry,” said the Bank’s Acting Director General for East Africa, Nnenna Nwabufo.

The financing will enable the Government of Djibouti to support three interlinked COVID-19 response programs to enhance health systems; safeguard livelihoods and provide social protection; and defend labour force productivity and economic activity.

Health-sector interventions include the implementation of a multi-sectoral crisis response strategy and dissemination of infection prevention and control guidelines to health facilities. Social protection measures include covering electricity bills for vulnerable households and maintenance of price-control mechanisms and supplies of staple foods.

To support the workforce and economy, the government proposes to suspend non-priority expenditure while increasing social spending in the budget; defer taxes for the hardest-hit enterprises; and defer tax deadlines and social security contributions for enterprises that commit to continue paying employee salaries.

Djibouti, with a population of 1 million, has one of the highest COVID-19 case rates in the Horn of Africa. The government has responded by suspending non-essential business and social activities, closing off air and sea connections and introducing partial curfews and lockdowns.

The crisis has placed the country’s recent socioeconomic progress in jeopardy and increased its susceptibility to political instability and climate-induced shocks. The Horn of Africa region has also experienced swarms of locusts over the past year that have increased food insecurity.

Under a worst-case scenario, Djibouti’s real GDP in 2020 is forecast to contract by 3.8%, threatening as many as 40,000 jobs.

The Bank’s grant funding aligns with Djibouti’s development objectives and those of its COVID-19 Emergency and Solidarity Fund. The intervention also aligns with the Bank’s Ten-Year Strategy, and its Eastern Africa Regional Integration Strategy and broader efforts to combat fragility and build resilience in Africa.