IMF Executive Board Approves Loan Reforms to Better Support Low-Income Countries | Invest News
WASHINGTON (Reuters) – The International Monetary Fund on Thursday said it would revamp its concessional lending programs to better support low-income countries during the COVID-19 pandemic and recovery, and spoke of the prospect of limited sales of gold from the IMF to strengthen its lending capacity.
The IMF said its board last week backed reforms, including increasing the limits on access to concessional finance for low-income countries by 45%; eliminate access limits for the poorest countries with eligible programs; and maintaining zero percent interest rates on these loans.
The changes are needed given an eight-fold increase in IMF lending to low-income countries to $ 13.2 billion in 2020, and signs that demand for concessional financing will remain high for several years, the IMF said.
“The two-stage financing strategy that has been approved by the IMF’s executive board will ensure the resources we need to really get through this pandemic and its immediate consequences,” Christian Mumssen, deputy director of the department, told reporters. financial support from the IMF.
To increase the lending capacity of its Poverty Reduction and Growth Trust Fund, the IMF has said it will request an additional $ 18 billion in the coming years from member countries, in addition to some $ 24 billion. already raised since the start of the crisis, plus $ 4 billion in subsidies. to support zero percent interest rates.
Richer member countries could channel their existing and new emergency reserves of Special Drawing Rights to raise funds, the IMF said, adding that the expected approval of a $ 650 billion increase in the allocation from the IMF’s SDR in August could help ease the fundraising process.
The changes are part of a two-step plan that calls for finding a “lasting solution” to the IMF’s concessional financing model in 2024-2025, including a possible “limited sale” of the IMF’s gold reserves, according to an IMF staff document. .
In a press release, the IMF said its board recognized that the demand for additional financing from members was “substantial,” but underscored the important role the PRGT had played in helping low-income countries. returned to respond to the pandemic.
He said many directors recommended early exploration of all financing options, including mobilizing internal IMF resources and exploring gold sales before the second stage.
However, a few directors did not support this option, citing the complexity and time required to make such sales, as well as “the possible impacts on the strength of the Fund’s balance sheet”.
(Report by Andrea Shalal, edited by Chizu Nomiyama and Sonya Hepinstall)
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