## Stepping Up to Meet Low-Income Countries’ Pandemic Recovery Needs

_IMF Blog, July 26, 2021_

## Source details

**Canonical URL:** [Stepping Up to Meet Low-Income Countries’ Pandemic Recovery Needs](https://www.imf.org/en/blogs/articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs)

## Other formats

- [Markdown version](/en/blogs/articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs/index.md)
- [Structured JSON version](/en/blogs/articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs/index.json)
- [Bundle manifest](/en/blogs/articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs/bundle-manifest.json)

## Bibliographic details
- Authors: Christian Mumssen, Sen Nolan
- Published: July 26, 2021

---

### A rapid, unprecedented response
- The pandemic caused output growth to stop or reverse, living standards to decline, poverty to increase, and threatened a decade of solid progress in low-income countries.
- Financial assistance to 50 low-income countries reached $13 billion in 2020 compared to an average of $2 billion a year pre-pandemic: a more than sixfold increase.
- The IMF provided $739 million in grant-based debt service relief to 29 of its poorest and most vulnerable members.
- Three-quarters of the new lending came from the Poverty Reduction and Growth Trust (PRGT) — the IMF’s vehicle for zero-interest loans to low-income countries.
- Most PRGT assistance was in the form of emergency disbursements with limited conditionality focused on ensuring transparent use of the resources to address pandemic-related needs.
- IMF assistance was crucial for many low-income countries that entered the pandemic with limited financial means to support lives and livelihoods.

### Far-reaching reforms to PRGT
- Increased access to concessional financing for all low-income countries: Limits on normal access to PRGT resources have been raised by 45 percent.
- Uncapped access to concessional financing for the poorest countries: Access will no longer be subject to maximum levels for poorer countries with strong economic programs that meet the criteria for obtaining above-normal access levels.
- Retention of zero interest rates for all PRGT facilities: Interest rates on all PRGT loans, reviewed every two years, will be kept at zero until July 2023.
- Reinforced safeguards to protect low-income countries from over-indebtedness: IMF program design will pay added attention to the debt levels of countries at risk.

### Projected demand and funding needs
- Total IMF lending to low-income countries is projected to reach around $48 billion during the pandemic and its immediate aftermath.
- PRGT credit outstanding could peak at $32 billion in 2025-26 (chart, black line).
- There are significant uncertainties around the timing and strength of economic recovery, and the possible demand for Fund concessional support (blue shaded area).
- IMF loans will meet only a fraction of the external financing needs of low-income countries; bilateral donors and multilateral development agencies must also step up through bilateral aid and support for the IMF’s fund-raising efforts.
- To maintain sustainable levels of debt, much financing will need to come through grants and highly concessional lending.

### A two-stage funding strategy
- Stage 1:
  - Mobilize a further $18 billion in PRGT loan resources.
  - Mobilize $3.3 billion in new bilateral contributions for subsidy resources to allow continued lending through the PRGT at zero interest rates.
  - Donors will be offered various, flexible mechanisms for providing subsidy resources.
  - Use of IMF internal resources of about $0.7 billion will complement donor contributions.
- Stage 2 (in 2024/25):
  - By 2024/25—by which time current economic uncertainties are expected to have receded—the IMF will decide on the size of the PRGT and associated funding mechanisms for the long term.
  - Use of existing and new SDRs is expected to facilitate the funding effort.

### Policy implications and appeals to donors
- The IMF has increased access to financing and set a long-term vision for concessional lending while reinforcing safeguards against over-indebtedness.
- Donor participation is critical: the IMF has opened the door for donors to play their part through subsidy contributions and support for concessional lending.
- The sums required are large, but the alternative—inaction—would exact a far larger human and economic cost.

*Source: Stepping Up to Meet Low-Income Countries’ Pandemic Recovery Needs — IMFBlog, July 26, 2021*

---


## References

- [عربي](https://www.imf.org/ar/News/Articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs)
- [日本語](https://www.imf.org/ja/News/Articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs)
- [Português](https://www.imf.org/pt/News/Articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs)

_Source: https://www.imf.org/en/blogs/articles/2021/07/26/blog-stepping-up-to-meet-low-income-countries-pandemic-recovery-needs_