LOW-INCOME STATES WIN IMF PACKAGE

By BUUMBA CHIMBULU THE International Monetary Fund (IMF) has approved policy reforms and funding package to better support the recovery of low-income countries from the Covid-19 pandemic. According to the IMF, the reforms seek to ensure flexibly in supporting Low Income Countries (LICs’) financing needs during the pandemic and the recovery while continuing to provide concessional loans at zero interest rates. The centre-piece of the approved policy reforms is a 45 percent increase in the normal limits on access to concessional financing, coupled with the elimination of hard limits on access for the poorest countries. The higher access limits would facilitate the provision of more concessional support to LICs with strong policies and large balance of payments needs. The Executive Board also approved a two-stage funding strategy to cover the cost of pandemic-related concessional lending and support the sustainability of the Poverty Reduction and Growth Trust (PRGT). The first stage of the strategy aims to secure SDR 2.8 billion in subsidy resources (to support zero interest rates), and an additional SDR 12.6 billion in loan resources which could be facilitated by the “channeling” of SDRs. Executive Directors supported the proposed package of reforms to the concessional financing facilities and the associated two-stage funding strategy to ensure sustainability of concessional lending. They agreed that LICs have been particularly hard hit by the Covid-19 pandemic and would face significant challenges in achieving sustainable inclusive growth in the coming years. They noted that the Fund had responded quickly to provide financial support to LICs at an unprecedented scale, and, looking ahead, should continue supporting countries that are implementing strong economic programs aimed at recovering from the pandemic and raising living standards.