March 25, 2023

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The IMF sets up a new financial mechanism

“DThe first IMF facility to provide affordable long-term financing, the DR (Resilience and Sustainability) Trust Fund aims to help countries build resilience to structural challenges such as climate change and pandemics,” said IMF Managing Director Kristalina Georgieva.

The goal, he said, is to ensure that these countries “maintain their long-term economic and financial stability while mobilizing other public and private financing.”

Loans under the new mechanism have a maturity period of 20 years, with a grace period of 10 and a half years. Citing the Covid-19 pandemic, the war between Ukraine and Russia and the cost-of-living crisis it led to, and climate change, Ms. Georgieva recalled that within three years, the world had been hit by a series of shocks. knows no rest”.

Last April, the IMF’s Board of Directors approved the creation of the new fund, which will become the third pillar of the international institution’s lending instruments, along with the General Resources Account and the Trust Fund for Poverty Reduction and Development.

It will benefit eligible low-income and middle-income countries, which represent three-quarters of IMF member countries.

It will “increase the impact of last year’s $650 billion special drawing rights allocation, by channeling stronger member state resources to countries with the greatest needs for economic planning”.

Germany, Australia, Canada, China, Spain and Japan have set aside 15.3 billion SDR ($20 billion) in first tranche resources, the IMF says, making this first tranche only slightly more than half of total commitments. Funding has been committed by 13 countries to date, amounting to 29 billion SDRs ($37 billion).

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New contributions are expected to become operational in early 2023, once national procedures are completed, which will give the IMF a solid foundation to respond to demands in the coming years. The IMF CEO announced the “strong interest” countries are showing in financing under the new fund.