BY BAMIDELE FAMOOFO
Kristalina Georgieva, Managing Director, International Monetary Fund, has announced the decision of the IMF’s Executive Board to approve the creation of a new Resilience and Sustainability Trust to come into effect on May 1, 2022.
The Trust aims to help low-income and vulnerable middle-income countries address longer-term structural challenges that pose macroeconomic risks, including climate change and pandemics.
According to Georgieva, the aspiration is to build a Trust of at least $45 billion in resources.
“The RST will amplify the impact of the $650 billion SDR allocation implemented last year by channeling resources from economically stronger members to countries where the needs are greatest,” she noted.
The RST will serve as a third pillar of the IMF’s lending toolkit, in addition to the General Resources Account and the Poverty Reduction and Growth Trust.
The RST will provide policy support and affordable longer maturity financing – with a 20-year maturity and a 10½ -year grace period – to help build resilience against long-term risks to balance of payments stability.
About three-quarters of the IMF’s country membership will be eligible for RST financing, including low-income members as well as most middle-income countries and all small developing states.
“We have worked extensively with our members and other stakeholders to design the RST, with the goal of balancing the needs of potential contributors and borrowers.
“The reforms supported by the Trust are also intended to catalyze increased financing from the private sector, donors, and other international financial institutions (IFIs).”
Close collaboration with the World Bank and other IFIs will be critical for the success of the RST.
“As the world is confronting consecutive global shocks, we must not lose sight of the critical actions needed today to ensure longer-term resilience and sustainability—and we can only succeed by working together.
Our membership had called on us to enhance our existing lending toolkit to address a growing need for building resilience and sustainability now in order to reduce economic risks in the future. Today, our membership has come together and responded,” IMF noted.
