LONDON / WASHINGTON, June 24 (Reuters) – The IMF’s plan for a new “Resilience and Sustainability” fund that would expand support to dozens of more vulnerable countries garnered key international support on Thursday ahead of crucial meetings.
IMF chief Kristalina Georgieva this month proposed the new trust to allow rich countries to channel some of their new IMF reserves to their poor and middle-income counterparts ravaged by COVID or climate change. Read more
“This is something we certainly support,” said Lars Jensen, senior economist at the United Nations Development Program (UNDP) and author of a new report on how new IMF financing should be directed. Read more
The UNDP believes that the IMF’s Poverty Reduction and Growth Trust (PRGT), which is also expected to play a key role in a voluntary redistribution of new “Special Drawing Rights” (SDRs), is only open. ‘to 55 of the 82 most indebted countries in the world. -vulnerable developing economies.
The wealthy nations of the Group of Seven (G7) alone will receive $ 283 billion of the overall SDR allocation of $ 650 billion. All “high income” countries will receive $ 438 billion, while 75 of the poorest countries will receive $ 62 billion among them.
The COVID crisis is expected to leave 47 of the 82 countries vulnerable with gross debt already above levels deemed sustainable.
In addition, nine of the ten countries most vulnerable to climate change are also developing economies highly vulnerable to debt.
“As a possible development goal of an SDR channeled to vulnerable countries, it would be natural to target climate because of its global implications,” Jensen said, adding that the fund could even increase by using it on debt markets.
G7 leaders have already signaled their support for redistributing $ 100 billion of new SDR money. Georgieva said China has expressed interest in participating and expects other major emerging economies to do the same.
The IMF’s executive board will meet on next steps on Friday, and finance officials from the Group of 20 major economies will discuss the issue of SDR reallocation at their meeting in Venice in July.
Scott Morris of the Center for Global Development said funding for the new IMF trust project was already provided for in the recent US Treasury budget request to Congress, underscoring Washington’s support.
The US Treasury is working closely with the IMF to explore options and design mechanisms for channeling SDRs to vulnerable countries, a US Treasury official told Reuters on condition of anonymity due to the sensitivity of the matter.
“The IMF’s resilience and sustainability trust project is one of the options under discussion,” the official said, without giving details of the other options.
Jensen said he hoped the new fund would also give distressed countries that have so far resisted debt restructuring for fear of losing access to debt markets a safety net to take that step. . Read more
Reporting by Marc Jones. Editing by Gerry Doyle
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