IMF proposes $50bn trust fund for Ghana, other vulnerable African economies
In an effort to build resilience to balance of payments shocks, The International Monetary Fund (IMF) has proposed a $50bn trust fund for Nigeria and other low-income and vulnerable middle-income countries.
This was disclosed by the IMF in a blog post titled, ‘A New Trust to Help Countries Build Resilience and Sustainability.’
The IMF stated that amid the covid-19 pandemic it is crucial not to overlook the long-term challenge of transforming economies to become more resilient to shocks and achieve sustainable and inclusive growth
What the IMF is saying
The report said, “A proposed $50bn trust fund could help low-income and vulnerable middle-income countries build resilience to balance of payments shocks and ensure a sustainable recovery.
The IMF explained that the shock of the pandemic shows the importance of rectifying long term challenges.
“The pandemic has taught us that not addressing these long-term challenges in a timely manner can have significant economic consequences, with the potential for future balance of payments problems.”
The IMF Identified Climate change as another long-term challenge that threatens macro-economic stability and growth in many countries through natural disasters and disruptions to industries, job markets, and trade flows, among others.
The IMF stated that the challenges are not peculiar to low-income countries alone, classifying them as global public policy challenges.
IMF said, “These are global public policy challenges, and it is the shared responsibility of individual countries and the international community to take timely actions.”
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The IMF would need the support of its member states and approval by the IMF Executive Board for the proposed Fund, IMF said, “With broad support from the membership and international partners, we hope that the Trust can be approved by the IMF Executive Board before the upcoming Spring Meetings and for it to become fully operational before the year’s end.”
Key takeaways
RST finance could be available to almost three-quarters of the IMF’s membership. This would encompass all low-income nations, developing and vulnerable small states, and middle-income countries with per capita GNPs less than ten times the 2020 IDA operating cutoff, or around $12,000.
Staff from the IMF and the World Bank collaborated closely to create a coordination framework for Resilience and Sustainability Trust (RST) activities on climate risks, relying on previous expertise in assisting countries with structural reforms.
RST funding would be part of a broader financing strategy pursued by members to address the longer-term balance of payments vulnerabilities, which would include a mix of multilateral, bilateral official, and private finance.
An eligible member must have a package of high-quality policy measures consistent with the RST’s purpose; a concurrent financing or non-financing IMF-supported program with appropriate macroeconomic policies to mitigate risks for borrowers and creditors, and sustainable debt and adequate capacity to repay the Fund.
