IMF Concessional Financing Support for Low-income Countries

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The IMF provided financial support to 53 of 69 eligible low-income countries in 2020 and in the first half of 2021, with about US$14 billion disbursed as zero percent interest rate loans from the Poverty Reduction and Growth Trust (PRGT).
Most support was through the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI), which provide immediate, one-time disbursements to countries facing urgent balance of payments needs.
The IMF responded to a record number of requests through temporary access limit increases to the RCF and RFI, and temporary increases in PRGT overall access limits.
The demand from low-income countries (LICs) for IMF financial support is expected to remain high over the next few years, including from countries that have already received substantial emergency support since the onset of the pandemic.
The IMF’s lending commitments to low-income countries grew to over six times the annual average of the past decade.

Primary emergency instruments:
- Rapid Credit Facility (RCF)
- Rapid Financing Instrument (RFI)
Catastrophe Containment and Relief Trust (CCRT) relief:
- 29 of the Fund’s poorest and most vulnerable countries received debt service relief through the CCRT.
- The CCRT delivered grant-based relief totaling US$739 million for debt repayments falling due to the IMF between April 2020 and October 2021.
Independent HIPC actions:
- Substantial IMF debt relief approved to Somalia and Sudan under the Highly Indebted Poor Countries (HIPC) initiative.
- Both countries cleared arrears to the IMF and the World Bank and reached HIPC Decision Point in March 2020 and June 2021, respectively.
- Total IMF debt relief to Somalia and Sudan will amount to US$1.7 billion (including interim assistance).

First: increased access to concessional financing
- Normal access limits on PRGT resources raised by 45 percent—from 300 percent of quota to 435 percent of quota.
- The hard limit on access by the poorest countries has been eliminated, allowing them to receive all support from the IMF through the concessional PRGT when their economic programs are assessed to warrant exceptional levels of assistance.
Second: interest rate policy
- Interest rates on PRGT loans will remain at zero, at least through July 2023.
Third: scope of reforms
- (i) A simpler and more robust framework to support better-off low-income countries to access blended financing (borrowing from both concessional PRGT resources and the Fund’s non-concessional General Resources Account (GRA)).
- (ii) Stronger safeguards to help protect sustainability of public debt in borrowing countries.

The unprecedented volume of concessional lending since the onset of the pandemic and expected high demand far exceeds pre-crisis expectations and created a sizable resource gap in the PRGT.
Two-stage funding strategy approved by the IMF’s Executive Board:
- Stage 1 (near term):
- Secure about US$4 billion in subsidy resources needed to finance zero-interest lending from the PRGT.
- About US$0.7 billion drawn from internal Fund resources.
- Voluntary subsidy contributions totaling US$3.3 billion from the Fund’s economically stronger members.
- Mobilize about US$18 billion in new PRGT loan resources from PRGT lenders (these resources are borrowed from the lenders to the PRGT and lent on to low-income countries).
- Stage 2 (planned for 2024-25):
- Seek a longer-term solution to the concessional financing model, including possible use of Fund internal resources.
- Informed by an updated assessment of demand from low-income country members for Fund financing.
- The evolution of demand and PRGT resources will be monitored carefully and contingency measures will be taken if necessary to address potential resource shortfalls.

Development partners are asked to play a key role in assisting low-income countries during the crisis through a broad burden-shared fundraising effort.
The IMF is approaching economically stronger members to secure:
- Subsidy contributions of about US$3.3 billion.
- New loan resources of about US$18 billion.
Donors have flexibility on how and when to deliver subsidy contributions; options include:
- Pledging budgetary grants disbursed over time.
- Investment agreements that generate returns used for subsidization resources.
- Donating interest earned on SDR holdings.
- Providing PRGT loans at below market rates.

53 of 69 eligible low-income countries received IMF financial support in 2020 and the first half of 2021.
About US$14 billion disbursed as zero percent interest rate loans from the PRGT.
US$739 million in CCRT grant-based relief for IMF debt repayments between April 2020 and October 2021.
US$1.7 billion total IMF debt relief to Somalia and Sudan (including interim assistance).
PRGT normal access limits raised from 300 percent of quota to 435 percent of quota (a 45 percent increase).
PRGT interest rates remain at zero at least through July 2023.
IMF to secure about US$4 billion in subsidy resources (including about US$0.7 billion internal resources and US$3.3 billion voluntary contributions).
IMF to mobilize about US$18 billion in new PRGT loan resources.
Stage 2 planning period: 2024-25.