G20 backs IMF chief’s new trust to reach broader range of countries in need

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WASHINGTON (Businesshala) – IMF chief Kristalina Georgieva on Wednesday secured the support of the Group of 20 major economies for a new trust that will allow wealthy IMF members to widely donate their share of the newly created emergency reserves to countries in need. will allow.

FILE PHOTO: International Monetary Fund (IMF) Managing Director Kristalina Georgieva remarks at an inaugural news conference during the IMF and the World Bank’s 2019 Annual Fall Meeting of Finance Ministers and Bank Governors in Washington, US October 17, 2019. REUTERS / Mike Thiler

G20 finance officials endorse the new Resilience and Sustainability Trust (RST) in their release Here, and called on the International Monetary Fund and the World Bank to “cooperate closely” to develop and implement financing under the new trust.

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The RST will allow IMF members to channel their share of the IMF’s $650 billion into new special drawing rights to help small island states and vulnerable middle-income countries as well as low-income countries already out of poverty need long-term financing. can be offered. Shortage and Development Trust.

The creation of the trust aims to address concerns about several low and middle income countries that were badly hit by the COVID-19 pandemic, leaving them with fewer resources to prepare for and deal with extreme weather events .

Georgieva first disclosed work on the trust here in June, saying its funds could be used to address risks related to climate change and pandemics, uses not currently covered under the trust.

Georgieva told reporters on Wednesday that she was encouraged by the IMF’s executive board considering the RST during a meeting on Friday, adding that some wealthy members had already expressed interest in contributing.

An IMF staff paper seen by Businesshala estimated income-based eligibility for all 69 countries, 15 small developing states and 55 middle-income countries eligible for the PRGT, with $30 billion to $50 billion for new trusts over 10 years. Billion demand is anticipated.

It proposed that RST applicants be required to have an existing IMF program with upper credit tranche conditionals, and agree to reforms to strengthen external and domestic stability.

Kevin Gallagher, director of the Center for Global Development Policy at Boston University, called the G20’s rapid acceptance of the new trust a “historic achievement”, underscoring the urgency of the challenges facing countries around the world.

But he said requiring applicants for the current IMF program would be wrong, as it would leave countries such as the Dominican Republic, which were at risk of extreme climate-related events such as hurricanes, without access to aid.

Taking a jibe at the IMF chief, the IMF chief said he expects advanced economies to reach their goal of transferring around $100 billion of new SDR allocations to countries in need.

He added that the fund is also taking measures to increase transparency regarding the use of any SDRs.

Asked about reservations expressed by some critics that the RST trust would overlap with the World Bank’s mandate, Georgieva said the fund was working closely with the Multilateral Development Bank as it developed the new trust.

He noted that the IMF’s first presentation about the RST was to the Board of the World Bank, and a large World Bank team participated in the presentation to the staff of the IMF Board.

Some members remain cautious. German Finance Minister Olaf Scholz, in a statement prepared for Thursday’s meeting of the International Monetary and Financial Committee, called for a “clear delineation” of actions between funds and institutions such as the World Bank, and said any new trusts should be “carefully” should be designed “to avoid unintended consequences and drawbacks.”

He also said that the IMF should act to prevent any risk of “convenience buying” and members’ ability to repay regular IMF programmes, and noted that climate change and pandemic preparedness are primarily focused on the multilateral development banks. The dispatch remains.

Martin Muhlsen, who headed the IMF’s strategy division from 2017-2020, cited “a fundamental restructuring” of the fund’s agenda and reasonable concerns about the growing overlap with the World Bank, in an article for the New Atlanticist. Here

He said the fund’s legal mandate was limited to providing short-term balance of payments support to help countries maintain financial stability, and it lacked the expertise to advise countries on detailed climate policies.

Reporting by Andrea Schallal and David Lauder; Editing by Andrea Ricci and Stephen Coates

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