Press Release: IMF Announces Unprecedented Increase in Financial Support to Low-Income Countries
July 29, 2009Press Release No. 09/268
July 29, 2009
The Executive Board of the International Monetary Fund (IMF) has approved unprecedented measures that will sharply increase the resources available to low-income countries in this time of global crisis. The resources—including from the sale of IMF gold— are expected to boost the Fund’s concessional lending by up to $17 billion through 2014, including up to $8 billion over the next two years. In addition, the IMF announced zero interest payments on outstanding concessional loans through end-2011 for all low-income members. A new set of lending instruments will underpin this increased support.
“This is an unprecedented scaling up of IMF support for the poorest countries, in Sub-Saharan Africa and all over the world,” said IMF Managing Director Dominique Strauss-Kahn. “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 IMF support package includes:
• Scaled-up concessional financial assistance to low-income countries to boost the Fund’s concessional lending capacity by up to $17 billion through 2014, including up to $8 billion in the first two years. This exceeds the G20 call for $6 billion in new lending over two to three years.
• Interest relief, with zero payments through end-2011 on the IMF’s concessional facilities to help low-income countries cope with the crisis.
• Permanently higher concessionality of Fund financial support, with a mechanism for updating interest rates after 2011.
• A new set of financial instruments tailored to the diverse needs of low-income countries and better suited to meet the crisis challenges:
– the Extended Credit Facility provides flexible medium-term support;
– the Standby Credit Facility addresses short-term and precautionary needs; and
– the Rapid Credit Facility offers emergency support with limited conditionality
In addition, the IMF’s Executive Board recently backed the Managing Director's proposal for a new general 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.
Mr. Strauss-Kahn said that “All this represents a historic effort by the Fund to help the world’s poor.” He added that there would be greater emphasis in Fund-supported programs on poverty reduction and growth objectives across all its new lending instruments, including targets to safeguard social and other priority spending.
The IMF already announced this year a more flexible approach to conditionality in the programs it supports: structural reform conditions have been streamlined for all Fund-supported programs. Structural conditionality in medium-term, low-income country programs will become more flexible and focused on core goals tailored to each country. IMF-supported programs have also accommodated larger fiscal deficits during the crisis in most low-income countries.
“Since the crisis hit, we have been listening and responding to our member countries,” said Mr. Strauss-Kahn. “The scaling up of the IMF’s support not only will help these low-income countries weather a crisis that is not of their making. Once the crisis has passed, it also will pave the way for progress in the battle against poverty.”