WASHINGTON (AFP) – The IMF board announced Thursday it had approved a massive increase in its ability to provide interest-free loans to low income countries to help them recover from the pandemic’s economic destruction.
The Covid-19 crisis has drained resources set aside for these countries — most are which are in sub-Saharan Africa — far faster than anticipated, and their needs will remain high, the International Monetary Fund said.
The changes, which the IMF board approved July 14, include a 45 percent increase in the limits on normal lending, and removes altogether the caps on access for the poorest countries.
However, officials made clear the IMF is not offering nations a blank check.
”The decision to raise access limits is not a directive to lend more across all IMF programs — rather, it provides the flexibility to provide more zero interest financing for countries with strong economic programs to handle the pandemic and the path to full recovery,” said Sean Nolan, deputy director of the Strategy Policy and Review Department.
The Washington-based crisis lender provides the financing largely through ”multi-year lending arrangements,” unlike in 2020, when most aid was pushed out through emergency programs that disbursed immediately and were not conditioned on economic policies.
The fund dramatically increased its financing to poor nations last year, eight times higher than the average in the prior three years, and said demand ”is projected to continue at elevated levels for several years.”
The IMF also is working to boost funding for its Poverty Reduction and Growth Trust (PRGT) to provide the zero-interest loans, calling for an initial injection of about $4 billion, including from member contributions.
The organization is seeking another $18 billion in 2024-2025 which could come from ”channeling” existing and new Special Drawing Rights (SDR), the reserves held by members.
The IMF board early this month approved a new allocation of $650 billion SDRs, which should be completed by the end of August, and will provide liquidity while allowing richer members to share those reserves with countries in need.