IMF boosts lending to middle-income countries

Photo: AP

The International Monetary Fund announced it was adjusting its lending policy to ease access to funding to countries which were affected by climate changes, Reuters reported. IMF will introduce new mechanisms which will allow IMF members to lend their reserves in the fund. That would help middle-income countries vulnerable to climate change, IMF chief Kristalina Georgieva said.

Georgieva said leaders of the Group of Seven rich economies had given the IMF a 'green light' to keep working on the plan, and China - the world's second largest economy - had also expressed interest, along with middle-income countries that stand to benefit from such a fund. She said the IMF would continue working on the "Resilience and Sustainability Trust" - which could help countries combat climate change or improve their health care systems - ahead of the July meeting of finance officials from the Group of 20 major economies, which includes China. "Now we have the indication that we have a green light to go ahead, and we will reach out to others," Georgieva said.

G7 leaders said they welcomed an expansion of the global lender’s emergency reserves, or Special Drawing Rights (SDRs), by $650 billion, and backed a global target of providing $100 billion to the most vulnerable countries, but said other countries should participate. The IMF's Poverty Reduction and Growth Trust already allows members to share their IMF reserves, but small island states and other middle-income countries that have been hit hard by the coronavirus pandemic and significant economic downturns, are not eligible for funding through that IMF vehicle.

The IMF has been urging rich countries to act, warning that a big divergence in the recoveries of advanced and developing economies could undercut demand and disrupt supply chains, which would also affect countries that are recovering faster. "This is a moral imperative and an economic necessity," Georgieva said, adding that allowing the gap between rich and poor countries to continue to widen could also trigger unrest.

The IMF expects its board to formally approve the $650 billion SDR allocation in August, paving the way for member countries to donate their unneeded reserves to others in need.

More on this subject: Climate crisis

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