The Executive Board of the International Monetary Fund (IMF) has approved measures to sharply increase resources to low-income countries in response to the global economic crisis.
The measures described as unprecedented were announced in a press release Wednesday July 29, 2009.
According to the press release, the resources which will include proceeds from the sale of IMF gold are expected to boost the IMF’s concessional lending by up to $17 billion through 2014, including up to $8 billion over the next two years.
In addition, the Fund announced zero interest payments on outstanding concessional loans through end-2011 for all low-income members and a new set of lending instruments will underpin this increased support.
Commenting on the development, IMF Managing Director, Dominique Strauss-Kahn said, “This is an unprecedented scaling up of IMF support for the poorest countries, in Sub-Saharan Africa and all over the world,” adding, “the G20 asked the Fund to help respond to the global economic crisis, which has hit the low-income nations so hard, and we are responding with a historic set of actions in terms of support for the world’s poor. The new resources and new means of delivering them should help prevent millions of people from falling into poverty.”
As part of its response to the global economic crisis, the IMF has more than doubled its financial assistance to low-income countries. The new measures represent a significant additional effort in the coming years, the release said.
Additionally, the release said the IMF’s Executive Board recently backed the Managing Director’s proposal for a new general (Special Drawing Rights) SDR allocation of $250 billion, of which more than $18 billion will help bolster the foreign exchange reserves of low-income countries. If approved by the IMF’s Board of Governors, the proposed SDR allocation would take place at the end of August.
In order for the IMF to meet the new financing commitments, additional loan resources of SDR 9 billion will need to be mobilized from bilateral contributions. In addition, new subsidy resources of SDR 1.5 billion will need to be mobilized from the IMF’s internal resources—including from the use of revenue from the envisaged gold sales, and through bilateral contributions—to help cover the cost of concessional interest rates.
Ghana recently received a loan of more than $1 billion from the IMF to stabilize its economy and it is the biggest loan to an African nation since the start of the global economic crisis.
By Emmanuel K. Dogbevi