The International Monetary Fund (IMF) says its board of directors has established a new fund to aid the Caribbean and other developing countries with long-term COVID-19 pandemic and climate challenges.
The Washington-based financial institution said the Resilience and Sustainability Trust (RST) offers low-cost loans to developing countries, with emergency currency or Special Drawing Rights (SDRs) that wealthy countries will contribute.
“I am very pleased to announce that the IMF’s Executive Board today approved the creation of a new Resilience and Sustainability Trust to come into effect on May 1, 2022,” said IMF Managing Director Kristalina Georgieva in a statement. “The Trust aims to help low-income and vulnerable middle-income countries address longer-term structural challenges that pose macroeconomic risks, including climate change and pandemics.
“As the world is confronting consecutive global shocks, we must not lose sight of the critical actions needed today to ensure longer-term resilience and sustainability, and we can only succeed by working together,” she added.
Georgieva said the RST will “amplify” the impact of the US$650 billion SDR allocation implemented last year by channeling resources from economically stronger members to “countries where the needs are greatest.”
“The aspiration is to build a Trust of at least US$45 billion in resources,” she said, adding that the RST will serve as a third pillar of the IMF’s lending toolkit, in addition to the General Resources Account and the Poverty Reduction and Growth Trust.
Georgieva said the RST will provide policy support and affordable longer maturity financing – with a 20-year maturity and a 10ten and a half-year grace period – to help build resilience against long-term risks to balance of payments stability.
She said about three-quarters of the IMF’s country membership will be eligible for RST financing, including low-income members, as well as most middle-income countries and all small developing states.
“We have worked extensively with our members and other stakeholders to design the RST, with the goal of balancing the needs of potential contributors and borrowers,” Georgieva said.
“The reforms supported by the Trust are also intended to catalyze increased financing from the private sector, donors, and other international financial institutions (IFIs),” she added. “Close collaboration with the World Bank and other IFIs will be critical for the success of the RST.
“Our membership had called on us to enhance our existing lending toolkit to address a growing need for building resilience and sustainability now in order to reduce economic risks in the future,” the IMF chief continued. “Today, our membership has come together and responded.”
Eric LeCompte, Executive Director of religious development group Jubilee USA Network and a United Nations finance expert, said the new trust “provides an important way for wealthy countries to support developing countries struggling with the impacts of crises spurred by the pandemic and climate change.”
The IMF said Jubilee USA Network is an alliance of more than 75 US organizations and 750 faith communities working with 50 Jubilee global partners.
With the growing challenges that developing countries face and new global shocks from the war in Ukraine, “we need more tools like this trust,” LeCompte said.
In August, the IMF said it created US$650 billion SDRs. Due to IMF rules, about US$230 billion went to developing countries and more than US$400 billion went to developed countries.
CMC/
