IMF Executive Board Approves Lending Reforms to Better Support Low-Income Countries

Band Andrea Shalal

WASHINGTON, July 22 (Reuters)The International Monetary Fund said Thursday it would revamp its concessional lending programs to better support low-income countries during the COVID-19 pandemic and recovery, and raised the prospect of limited IMF gold sales to bolster its lending capacity.

The IMF said last week that its board had backed reforms that include increasing 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 necessary given the eightfold 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-step financing strategy that has been approved by the IMF’s executive board will secure the resources we really need to get through this pandemic and its immediate consequences,” Christian Mumssen, deputy director of the finance department, told reporters. of the IMF.

To boost the lending capacity of its Poverty Reduction and Growth Trust Fund, the IMF said it would seek an additional $18 billion in coming years from member countries, in addition to some $24 billion dollars already raised since the start of the crisis, plus $4 billion in grants. to support zero percent interest rates.

Wealthier 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 of IMF SDRs in August could help ease the fundraising process.

The changes are part of a two-step plan that calls for finding a “sustainable solution” to the IMF’s concessional financing model in 2024-25, including through a possible “limited sale” of IMF gold reserves, according to a IMF staff paper. .

In a press release, the IMF said its board had acknowledged that the push for additional funding from members was “substantial”, but stressed the important role the PRGT had played in helping countries low income 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 ahead of stage two.

However, a few directors did not support this option, citing the complexity and time required to make such sales, as well as “possible impacts on the strength of the Fund’s balance sheet”.

(Reporting by Andrea Shalal Editing by Chizu Nomiyama and Sonya Hepinstall)

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