IMF To Increase Lending To Poor Nations
The International Monetary Fund (IMF) has stated that it will increase its funding for low-income countries and offer new lending instruments to help those countries deal with the global economic crisis.
According to the Fund, it would raise the funds through the sale of its gold reserves and other instruments to help countries that are in need of the much needed funds.
The fund was however quick to add that the sale of its gold reserves would be done in manner that would not distort the world gold market.
Speaking at a video conferencing in Washington, with financial journalists from Accra, Lagos and Johannesburg on Wednesday, the , said the funds would be disbursed according to the programme member countries bring to the fund and not the size of the individual country.
Mr Strauss-Kahn was assisted at the video conferencing by Ms Antoninette Sayeh, IMF’s Director of the Africa Department of the fund.
The fund has projected demand for loans from low-income countries of up to $17 billion through to 2014, and said lending in 2009 and 2010 could reach about $8 billion.
Early this year, an IMF paper on the impact of the crisis on Low Income Countries (LICs) warned that the financial crisis, coupled with the sharp rise of food and fuel prices in 2007, had created higher financing needs that the international community would have to meet.
The IMF has agreed to increase concessional resources available to Low Income Countries to meet projected demand of about $17 billion through 2014.
Lending in 2009 and 2010 alone is expected to reach up to $8 billion thereby exceeding the G20 call for additional lending of $6 billion over the next two to three years. The new resources will include revenue from envisaged IMF gold sales.
Low-income countries will receive exceptional relief on all interest payments due to the IMF through 2011 on the IMF’s concessional lending instruments.
Future financial support will include permanently higher concessionality, with a mechanism for updating interest rates after 2011.
The fund’s membership also has approved a $250 billion allocation of Special Drawing Rights (SDRs) that will be distributed to all member countries according to their quotas in the IMF.
This means an allocation of more than $18 billion of SDRs to LICs to bolster their foreign exchange reserves and alleviate financing constraints.
The fund also said it would help poor counties by reducing to zero the interest charges on outstanding low-cost or concessional loans through 2011.
'This is an unprecedented scaling up of IMF support for the poorest countries in sub-Saharan Africa and all over the world,' said.
In addition, the IMF said it had designed three new lending instruments better suited for poor countries' circumstances, including a standby credit facility low-income borrowers could tap only when they need the funds.Currently, they're forced to draw the entire loan by the end of an IMF programme.
'By adopting these measures, the IMF has transformed its relations with low-income countries and responded directly to an international consensus on how to respond to the global crisis,' the IMF said.
It said the new instruments placed a 'strong emphasis on poverty alleviation and growth', and that programmes will include specific targets to safeguard social and other priority spending.
The announcement comes as the IMF and its sister organisation, the World Bank, worry that the global crisis could derail economic progress in some of the world's poorest countries, especially in Africa.
The IMF said in March the crisis would increase the financing needs of about two dozen low-income countries by at least $25 billion in 2009.