Washington DC – On Friday, the International Monetary Fund's Board discusses the proposed "Resilience and Sustainability Trust." The new vehicle could aid developing countries with pandemic response and challenges faced from climate change with low-interest, long-term loans.
“The IMF proposal is another way that wealthy countries can use their surplus pandemic response funds to support developing countries struggling with the COVID crisis, poverty and climate challenges,” said Eric LeCompte, the Executive Director of the religious development group Jubilee USA Network.
The loans would come from a trust with $30 to $50 billion in assets from the IMF-created reserve funds of wealthy countries, also known as Special Drawing Rights (SDRs). In August, wealthy countries received more than $400 billion in SDRs that could be used to support this trust and other processes for developing countries. Developing countries received about $230 billion in this relief aid.
"Developing countries categorized as middle-income economies continue to face some of the worst poverty increases and job losses. Yet these countries are not included in many of the previous pandemic relief processes," noted LeCompte, a United Nations finance expert whose group advocated for SDRs to fight the pandemic. "An important aspect of the new trust is that it could support developing countries left out of previous pandemic processes."
Some donor countries already use their SDRs to support zero-interest loans through the IMF’s Poverty Reduction and Growth Trust, but only the poorest countries are eligible to access it.
Friday's IMF meeting reviews possible economic reforms for developing countries to access loans from the new trust.
“As the health and economic crises persist across developing countries, it would be totally unacceptable if this new process has economic reforms that hurt vulnerable communities or prevent recovery from the crisis," added LeCompte.
The IMF plans to have agreement on basic principles to guide the new trust by their April, Spring meetings.