The International Monetary Fund has announced that it will develop a $50 billion trust fund for low-income and vulnerable middle-income countries by the end of 2022 to assist them build resilience to balance-of-payments shocks and put them on a path to long-term recovery.
This was revealed by the IMF in a blog post titled “A New Trust to Help Countries Build Resilience and Sustainability,” which was released on Thursday.
“A suggested $50 billion trust fund might help low- and middle-income nations build resilience to balance-of-payments shocks and assure a long-term recovery,” it stated.
“Even as countries continue to battle COVID-19, it is crucial not to overlook the longer-term challenge of transforming economies to become more resilient to shocks and achieve sustainable and inclusive growth.”
According to the Washington-based lender, the pandemic and climate change are challenges threatening macroeconomic stability and growth, and have a potential for future balance of payments problems.
It said these global public policy challenges are the shared responsibility of individual countries and the international community.
The IMF said it was considering how to channel some of the $650bn SDRs it issued in August from countries with strong external financial positions to vulnerable countries through a Resilience and Sustainability Trust.
The IMF said, “The RST’s central objective is to provide affordable long-term financing to support countries as they tackle structural challenges.
“As we’ve continued to work toward developing the RST, our current thinking on the key design features—which we outline further below—aim to balance the needs of potential contributors and borrowing countries.
“With broad support from the membership and international partners, we hope that the Trust can be approved by the IMF Executive Board before the upcoming Spring Meetings and for it to become fully operational before the year’s end.”
It added that about three-quarters of its membership could be eligible for RST financing, including all low-income countries, all developing and vulnerable small states, and all middle-income countries with per capita GNI below 10 times the 2020 IDA operational cutoff, or about $12,000.
It added that the aim of the trust was to address macro-critical longer-term structural challenges that entail significant macroeconomic risks to member countries’ resilience and sustainability, including climate change, pandemic preparedness, and digitalisation.
The monetary fund body said, “Like the IMF’s highly concessional and currently zero interest rate Trust for low-income countries, the RST would be established under the IMF’s power to administer contributor resources, which allows for more flexible terms, notably on maturities, than the terms that apply to the IMF’s general resources.
Ojelabi, the publisher of Freelanews, is an award winning and professionally trained mass communicator, who writes ruthlessly about pop culture, religion, politics and entertainment.
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