The International Monetary Fund (IMF) announced on Thursday that it had approved a massive increase in its ability to lend interest-free money to the poorest countries, to help them cope with the economic damage caused by the Covid-19 pandemic.
The changes, approved on July 14 by the IMF’s board of directors, provide for raising the limits on access to loans to allow the institution to be more flexible in the financial support it provides to these countries.
This is not intended to “lend more in all IMF programs”, but rather “to provide more zero-interest financing to countries with strong economic programs to manage the pandemic and the trajectory of full recovery,” said Sean Nolan, Deputy Director of the Policy and Strategy Review Department. This is not about writing blank checks, Fund officials stressed.
The IMF provides this financing largely through “multi-year loan agreements”, unlike in 2020, when most of the aid was delivered through emergency programs which were disbursed immediately and were not. conditioned by economic policies.
The pandemic is sinking the poorest countries
The Covid-19 crisis has depleted the resources reserved for these countries, most of which are in sub-Saharan Africa, much faster than expected, and their needs will remain high, the International Monetary Fund said.
The fund dramatically increased its funding to poor countries last year, eight times the average for the previous three years, and said demand “is expected to remain at high levels for several years.”
The IMF is also working to increase funding for its Poverty Reduction and Growth Fund (PRGT) to provide zero-interest loans, calling for an initial injection of around $ 4 billion, including contributions from members.
The organization is seeking an additional $ 18 billion for 2024-2025 that could come from existing and new Special Drawing Rights (SDRs), reserves held by members.
The board of directors gave its approval in early July to increase the institution’s reserves and lending capacities via a new general allocation of SDRs of $ 650 billion.
The proposal must now be approved by the Governing Council and the allocation could be effective by the end of August.