The International Monetary Fund (IMF) has approved a funding package of $3.6 billion for low-income countries. This decision comes along with reforms to its lending program aimed at helping these countries over the long term.
The money will be provided through the IMF’s concessional lending program, which gives financial support to low-income countries at lower interest rates. The IMF created a system called "Special Drawing Rights" (SDR) to help its member countries manage their reserves, and one SDR is worth about $1.33.
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In a statement, the IMF explained that due to the COVID-19 pandemic and other crises, the demand for loans has increased significantly. Annual lending has risen from an average of SDR 1.2 billion before 2020 to about SDR 5.5 billion since the pandemic started. This has put pressure on the IMF’s ability to continue providing support at the same level, and without reforms, lending could drop to just SDR 1 billion by 2027.
To prevent this shortfall, the IMF’s executive board approved a long-term annual lending capacity of SDR 2.7 billion ($3.6 billion). This is more than double the capacity before the pandemic, allowing the IMF to continue helping low-income countries with necessary funding and support for economic policies. The new reforms will also focus on ensuring the poorest countries continue to receive interest-free loans, while better-off countries will pay a small, concessional interest rate.
The IMF also plans to raise additional funds through various mechanisms, including using its own resources and further contributions from member countries. By doing this, the IMF aims to maintain a strong and sustainable financial support system for low-income countries in need.
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