The International Monetary Fund has said it is set to launch
a $50bn trust fund for low-income and vulnerable middle-income countries to
help them build resilience to balance of payments shocks and set them on the
path to sustainable recovery before the end of 2022.
The IMF disclosed this in a blog post titled, ‘A New Trust
to Help Countries Build Resilience and Sustainability’ published on Thursday.
It said, “A proposed $50bn trust fund could help low-income
and vulnerable middle-income countries build resilience to balance of payments
shocks and ensure a sustainable recovery.
“Even as countries continue to battle COVID-19, it is crucial not to overlook the longer-term challenge of transforming economies to become more resilient to shocks and achieve sustainable and inclusive growth.”
According to the Washington-based lender, the pandemic and
climate change are challenges threatening macroeconomic stability and growth,
and have a potential for future balance of payments problems.
It said these global public policy challenges are the shared
responsibility of individual countries and the international community.
The IMF said it was considering how to channel some of the
$650bn SDRs it issued in August from countries with strong external financial
positions to vulnerable countries through a Resilience and Sustainability
Trust.
The IMF said, “The RST’s central objective is to provide
affordable long-term financing to support countries as they tackle structural
challenges.
“As we’ve continued to work toward developing the RST, our
current thinking on the key design features—which we outline further below—aim
to balance the needs of potential contributors and borrowing countries.
“With broad support from the membership and international
partners, we hope that the Trust can be approved by the IMF Executive Board
before the upcoming Spring Meetings and for it to become fully operational
before the year’s end.”
It added that about three-quarters of its membership could
be eligible for RST financing, including all low-income countries, all
developing and vulnerable small states, and all middle-income countries with
per capita GNI below 10 times the 2020 IDA operational cutoff, or about
$12,000.
It added that the aim of the trust was to address
macro-critical longer-term structural challenges that entail significant
macroeconomic risks to member countries’ resilience and sustainability,
including climate change, pandemic preparedness, and digitalisation.
The monetary fund body said, “Like the IMF’s highly
concessional and currently zero interest rate Trust for low-income countries,
the RST would be established under the IMF’s power to administer contributor
resources, which allows for more flexible terms, notably on maturities, than
the terms that apply to the IMF’s general resources.
“Consistent with the longer-term nature of the balance of
payments risks the RST seeks to address, its loans would have much longer
maturities than traditional IMF financing. Specifically, staff has proposed a
20-year maturity and a 10-year grace period. A tiered interest structure would
differentiate financing terms across country groups, with a high degree of
concessionality for lower-income members.”
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