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Resilience and Sustainability Trust is taking shape

IMF continues to solicit support for new foundation to support needy countries

•• 2 Min
Resilience and Sustainability Trust is taking shape

The International Monetary Fund (IMF) said on Friday that it was still soliciting support from its members for the proposed resilience and sustainability trust, which would allow richer countries to pass on their IMF reserves to countries in need, but it hopes to use the new instrument in the next Year to see ready for use.

IMF officials are seeking support for the new trust fund, proposed by IMF chief Kristalina Georgieva in June, which would provide assistance to countries outside the low-income countries run by the existing Poverty Reduction and Growth Trust Fund.

The IMF encourages wealthier members to donate or borrow their share of $ 650 billion in newly issued Special Drawing Rights (SDRs) to needy countries, but some countries believe that the new Trust Fund would go beyond the IMF's remit.

In a blog posted on Friday, IMF Strategy Director Ceyla Pazarbasioglu and Deputy Uma Ramakrishnan said they hoped to make progress on the Resilience and Sustainability Trust at the IMF and World Bank annual meetings next week.

"It is never easy to find consensus; it takes time. It takes creative solutions to bridge differences," they wrote. "We are confident that, with the support of the international community, the RST will provide such an innovative solution that could be operational in just over a year."

They said the proposed RST would help build economic resilience and sustainability, particularly in low-income countries and small states, as well as vulnerable middle-income countries, by lending at lower interest rates and with longer terms than the IMF's traditional lending terms.

They said members would agree on purposes of funding, which could include climate, pandemic preparedness, and other "worthy global public policy goals."

They pointed out that the trust fund must be able to provide liquidity to creditors who are channeling their SDRs when faced with a balance of payments problem, as well as adequate credit risk coverage for donors.

To this end, they proposed a multi-layered framework to hedge credit risk with political protections, financial buffers, and a diversified base of creditors and borrowers.

They said that RST lending would likely be in addition to a regular IMF-backed program and benefit from the tight political safeguards in those programs.

They said the details of the size of the trust, eligibility requirements, conditionality, loan terms and financial architecture are still being worked out.

"We are working closely with other international financial institutions, particularly the World Bank, to ensure that the RST is part of a broader strategy for international country aid," it said.

IMFInternational Monetary FundMonetary Policies

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