To support Low Income Countries (LIC) especially hit hard by the coronavirus pandemic, the International Monetary Fund (IMF) has ramped up its support channel by approving reforms to provide concessional loans.
The institution said that the concessional loan reforms approved by its executive board would come with zero interest rates.
It noted that it had raised the limits to concessional funding by 45 percent for robust support of Low-Income Countries.
IMF said, “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 provision of more concessional support to countries with large balance of payments needs that are implementing strong economic programs to restore inclusive growth, while maintaining sustainable debt positions.
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“To support concessional financing to LICs through the PRGT, grant resources are needed to cover the costs associated with providing zero-interest lending.
“In 2019, the PRGT was assessed to have sufficient resources to finance interest subsidies on the Fund’s concessional lending on a self-sustaining basis over the long term.
“However, the volume of pandemic-linked lending—already provided or expected to be provided in the next few years—far exceeds what had been anticipated or previously recorded, creating a sizable shortfall in the necessary resources.
“Directors agreed that low-income countries (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 has 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.
“They supported the proposed increases in limits on normal access to resources of the Poverty Reduction and Growth Trust (PRGT) and the removal of the limits on exceptional access for the poorest countries.
“Directors supported the staff proposal to closely align the PRGT exceptional access criteria with the requirements of the Policy Safeguards on High Combined Credit, while retaining the current feature that only poorer LICs are eligible for exceptional access to the PRGT.
“Directors commended the exceptional response by donors to financing requests from the Fund during the past 18 months.
“They recognized that the support now being requested is substantial, even if spread over several years, but underscored that the PRGT has played a vital role in the response to the pandemic and, if adequately supported, would continue to provide essential support to LICs during the recovery and beyond.”
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