The International Monetary Fund is set to launch a $50bn trust fund for low-income and middle-income countries to help them build armor to balance payments shocks and set them on the path to recovery before the end of 2022.
The IMF released this in a blog post titled, ‘A New Trust to Help Countries Build Resilience and Sustainability’ published on Thursday.
It said, “A proposed $50bn trust fund could help low-income and vulnerable middle-income countries build resilience to balance of payments shocks and ensure a sustainable recovery.
“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.”
The pandemic and climate change are factors threatening macroeconomic stability and growth, and a potential for balance of payments problems. It said that global public policy challenges are the responsibility of individual countries and the international community.
The IMF said it was considering how to channel some of the $650bn it issued in August from countries with strong. financial positions to vulnerable countries through a Resilience and Sustainability Trust (RST).
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 the goal of the trust was to beat macro-critical longer-term structural challenges that consist of significant macroeconomic risks to member countries’ resilience and sustainability, including climate change, pandemic preparedness, and digitalization.
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”.
