On Wednesday, the International Monetary Fund (IMF) announced it would increase lending to low-income countries to help contend with the global economic crisis. The IMF is expected to provide up to $17 billion to these countries through 2014, including up to $8 billion over the next two years. Additionally, the IMF said that these countries would not be required to pay interest on any IMF loans, including outstanding through 2011.
At their meeting in April, G20 leaders asked the IMF to respond to the global financial crisis and called for $6 billion in new lending to low-income countries. In April, ONE joined other organizations to ask the IMF to build upon successes of the G20 Summit in London and provide African countries with the resources they need to get through the financial crisis in a way that does not create unsustainable levels of debt. ONE called on the IMF to direct more of their own resources and more of the anticipated profits from an impending sale of gold reserves to finance these efforts. The IMF has met requests to increase low-interest resources. Critically, the Fund also announced that all loans through 2011 will have no interest rate charges. Interest rates after 2011 will also be reduced.
The IMF’s announcement as also included new provisions for delivery, including new and re-vamped lending instruments to better suit each country’s needs. These instruments include a standby credit facility for countries to draw funds from when necessary, improving flexibility for recipients. The resources for these new loans will come partially from the sale of IMF gold reserves, explained representatives of the IMF.
The fund said lending to low income countries has increased over the past year to four times historical levels. In sub-Saharan Africa, new IMF lending commitments from January to mid July 2009 reached $2.7 billion compared with $1.1 billion for all of 2008. The World Bank estimates that as many as 50 million people risk being pushed into extreme poverty in 2009. This scaled-up funding represents an IMF effort to limit this damage. The fallout from the financial crisis continues to impair developing countries in sub-Saharan Africa.
In response to the IMF’s announcement, ONE supporter Bob Geldof said, “until recently, trillions had been found for fiscal stimulus packages for the rich world but nothing much for the bottom billion. Dominic Strauss Kahn’s radical leadership at the IMF has delivered a major breakthrough for the poorest countries being battered by an economic crisis not of their making. Great credit goes also to Barney Frank and the U.S. Treasury for their strenuous work in driving this deal forward.”
In addition to what IMF has announced today, we are hopeful that the IMF is exploring options to provide more resources for grants or debt relief.
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