Developed economies foot bill for IMF emergency funds
April 17, 2020 |
IMF members agree to redeploy SDRs for poorer countries, rather than allocate new ones
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Developed economies have pledged to support emergency funding from the International Monetary Fund (IMF) to help shield poorer countries from the economic fallout of the coronavirus pandemic, following a meeting of the International Monetary and Financial Committee (IMFC) on Thursday.
"What you have seen come out of the IMFC is unprecedented global solidarity," Lesetja Kganyago, head of the South African Reserve Bank and chair of the IMFC, said at a press conference after the meeting.
The United Kingdom, Japan, France, Australia and Canada committed $11.7 billion to concessional funding for the IMF's Poverty Reduction and Growth Facility, IMF Managing Director Kristalina Georgieva said at the same press conference.
"We got 70% of our ask," she added.
During the IMFC meeting, Germany promised to contribute to the IMF's Catastrophe Containment and Relief Trust (CCRT), increasing the lending capacity of the trust to $600 million. On April 13, the IMF approved $500 million in grant-based debt service relief for 25 countries under the CCRT with $185 million from the UK, $100 million from Japan and additional resources from China and the Netherlands.
Moody's said on Wednesday that countries that receive funding through the CCRT could suspend payments or renegotiate debt with private holders, adding that missed or delayed payments constitute a default under the rating agency's criteria.
Haiti is the only country in Latin America and the Caribbean among the 25 nations that already benefit from the program, according to the IMF. But Moody's said Honduras and Nicaragua are also eligible.
Georgieva said at the opening press conference for the 2020 Spring Meetings on Wednesday that the IMF was trying to triple capacity for concessional lending to help vulnerable countries respond to the coronavirus pandemic. She previously floated the idea that the IMF could allocate additional special drawing rights (SDRs) to increase the availability of short-term funding, but the IMFC did not come to an agreement on Thursday.
"That is not a topic that at this point that has full consensus," she said.
The United States was one of the countries that did not agree with the proposal to grant more SDRs.
"We recognize that a number of IMF members support a general SDR allocation to the membership. In our view, an SDR allocation is not an effective tool to respond to urgent needs," US Treasury Secretary Steven Mnuchin said in a statement.
IMF members did agree, however, to redeploy existing SDRs to mobilize short-term funding to poorer countries. Some advanced economies have SDRs, but do not need them, while some developing economies could make good use of them, Georgieva said.
"How we can make it possible to deploy on a large scale existing SDRs in support of developing countries? We are taking the message from the IMFC consensus on this topic," she said. "There is a precedent, and the question is how to build on a large scale the deployment of this resource for the benefit of developing countries."