IMF Okays Concessional Lending To Poor Countries

The International Monetary Fund (IMF) has approved a set of reforms to for concessional lending facilities to better support Low-Income Countries’ (LICs) during the pandemic and the recovery.

Photo Insert: Residential area, Rio de-Janeiro, Brazil

Approved by the IMF's Executive Board last July 14 was an associated funding strategy to support the long-term sustainability of the Poverty Reduction and Growth Trust (PRGT).

These reforms are set to ensure that the Fund has the capacity to respond flexibly to LICs’ needs over the medium term while continuing to provide concessional loans at zero interest rates.

Fund lending to LICs increased dramatically in 2020—an eightfold increase from average lending levels in 2017–2019. This is projected to continue at elevated levels for several years, as LICs seek financial assistance to help them respond to and recover from the pandemic.

The bulk of future financial assistance is expected to be provided through multi-year lending arrangements—a shift from 2020, when most assistance was provided through the Fund’s emergency financing facilities.

The centerpiece of the approved policy reforms is a 45 percent increase in the normal limits on access to concessional financing, coupled with the elimination of limits on access to the poorest countries provided their economic programs meet the requirements for obtaining above-normal access.

These higher access limits will allow the provision of more concessional support to countries with a large balance of payments needs that are implementing strong economic programs to restore inclusive growth while maintaining sustainable debt positions.

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