The Executive Board of the International Monetary Fund Â Â Â (IMF) has approved unprecedented measures that will sharply increase the resources available to low-income countries in this time of global crisis.
The resources, including from the sale of IMF gold, are expected to boost the Fundâ€™s concessional lending by up to $17 billion through 2014, including up to $8 billion over the next two years. In addition, the IMF announced zero interest payments on outstanding concessional loans through end-2011 for all low-income members. A new set of lending instruments will underpin this increased support.
â€œThis is an unprecedented scaling up of IMF support for the poorest countries, in Sub-Saharan Africa and all over the world,â€ said IMF Managing Director Dominique Strauss-Kahn. â€œThe G20 asked the Fund to help respond to the global economic crisis, which has hit the low-income nations so hard, and we are responding with a historic set of actions in terms of support for the worldâ€™s poor. The new resources and new means of delivering them should help prevent millions of people from falling into poverty.â€
As part of its response to the global economic crisis, the IMF has more than doubled its financial assistance to low-income countries. The new measures represent a significant additional effort in the coming years. The IMF support package includes:
â€¢ Scaled-up concessional financial assistance to low-income countries to boost the Fundâ€™s concessional lending capacity by up to $17 billion through 2014, including up to $8 billion in the first two years. This exceeds the G20 call for $6 billion in new lending over two to three years.
â€¢ Interest relief, with zero payments through end-2011 on the IMFâ€™s concessional facilities to help low-income countries cope with the crisis.
â€¢ Permanently higher concessionality of Fund financial support, with a mechanism for updating interest rates after 2011.
â€¢ A new set of financial instruments tailored to the diverse needs of low-income countries and better suited to meet the crisis challenges:
The Extended Credit Facility provides flexible medium-term support; addresses short-term and precautionary needs; and offers emergency support with limited conditionality
In addition, the IMFâ€™s Executive Board recently backed the Managing Directorâ€™s proposal for a new general SDR allocation of $250 billion, of which more than $18 billion will help bolster the foreign exchange reserves of low-income countries. If approved by the IMFâ€™s Board of Governors, the proposed SDR allocation would take place at the end of August.
In order for the IMF to meet the new financing commitments, additional loan resources of SDR 9 billion will need to be mobilised from bilateral contributions.
In addition, new subsidy resources of SDR 1.5 billion will need to be mobilised from the IMFâ€™s internal resources; including from the use of revenue from the envisaged gold sales, and through bilateral contributions, to help cover the cost of concessional interest rates.
Mr. Strauss-Kahn said that â€œAll this represents a historic effort by the Fund to help the worldâ€™s poor.â€ He added that there would be greater emphasis in Fund-supported programs on poverty reduction and growth objectives across all its new lending instruments, including targets to safeguard social and other priority spending. The IMF already announced this year a more flexible approach to conditionality in the programs it supports: structural reform conditions have been streamlined for all Fund-supported programs. Structural conditionality in medium-term, low-income country programs will become more flexible and focused on core goals tailored to each country. IMF-supported programs have also accommodated larger fiscal deficits during the crisis in most low-income countries.
â€œSince the crisis hit, we have been listening and responding to our member countries,â€ said Mr. Strauss-Kahn. â€œThe scaling up of the IMFâ€™s support not only will help these low-income countries weather a crisis that is not of their making. Once the crisis has passed, it also will pave the way for progress in the battle against poverty.â€