The International Monetary Fund has agreed to create a so-called Resilience and Sustainability Fund to help low- and middle-income countries address long-term challenges, such as the effects of climate change or prepare for future pandemics.
At a press conference today, the Deputy Director of the Strategy, Policy and Oversight Fund, Uma Ramakrishnan, explained that the agency’s board of directors approved the new fund on April 13, and that it will launch it on May 1.
The fund aims to provide vulnerable countries with long-term financing that will enable them to improve economic resilience and help balance payments in a stable manner.
This new instrument will complement the existing IMF lending instrument, the main difference of which is the focus on long-term structural challenges, as opposed to other programs, which focus more on immediate liquidity problems.
“Initially, the fund will focus on mitigating climate change and improving pandemic preparedness, as both are in the public interest and more goals can be added in the future,” Ramakrishnan said.
According to the International Monetary Fund, access to this tool will be optional and three-quarters of its member countries are likely to request it.
The money will come from rich countries with interests abroad and the beneficiaries will be those who need it most.
In this sense, access will depend on reforms undertaken by potential recipients to strengthen the economy and the sustainability of their debt, according to the IMF.
These will be loans of 20 years and a grace period of ten and a half years, with “modest” and low interest rates for the poorest countries.