Richer countries must step up support for the poorest, says IMF

March 31, 2023

WASHINGTON, Mar 31, CMC -The International Monetary Fund (IMF) said when finance ministers and central bankers including those from the Caribbean arrive in Washington next week for the annual  IMF-World Bank Spring meetings, they will have much to discuss, from the global economy’s fragile recovery to the risk of financial instability.

In addition, the Washington-based financial institution said that it is imperative however that they don’t forget the increasing needs of the world’s poorest nations, noting that the IMF’s tried-and-tested instrument to assist these countries, namely, the Poverty Reduction and Growth Trust (PRGT), is in urgent need of replenishment.

The IMF said since the coronavirus (COVID-19) pandemic, it has supported more than 50 low-income countries with some US$24 billion in interest-free loans via the PRGT, thus helping to stave off instability in a wide range of the world’s poorest nations.

It said now the PRGT must be adequately funded and subsidised so that this vital source of interest-free financing can continue, adding it is a matter of utmost priority.

“The challenges facing low-income countries have grown immensely in recent years. They have suffered from the pandemic as well as a succession of economic shocks. And today they face additional challenges from scarcer financing, high inflation, persistent food insecurity, rising debt vulnerabilities and sociopolitical tensions, especially in fragile and conflicted affected areas.

“We have revised down our growth projections for low-income countries, whose per capita income growth is falling further behind the rates needed to catch up with advanced economies. This threatens to reverse a decades-long trend of steadily converging living standards,” the IMF said, noting that without urgent action and more support, there is little chance of them making up the lost ground.

“In fact, we estimate low-income countries’ additional financing needs—to accelerate growth and put them back on a path to income convergence with advanced economies—to be about US$440 billion over the five years through 2026.”

The Washington-based financial institution said that domestic reforms to boost growth, strengthen public finances and raise more domestic revenue should help address this financing need.

“But, as we will spotlight during a special Spring Meetings session of donors and recipients on concessional financing on April 12, more international support is also needed—especially as official development assistance continues to fall short of the United Nations’ target of 0.7 percent of gross national income.”

The IMF said richer nations can assist poorer ones by pooling their resources and funding the work of the IMF, World Bank and other multilateral agencies, as well as through their own bilateral development programmes.

It said the PRGT is integral to this effort. It provides interest-free loans to support well-designed economic programmes that help catalyse additional financing from donors, development institutions, and the private sector.

The IMF said a failure to secure the PRGT resources would jeopardise the IMF’s ability to provide much-needed support to low-income countries as they seek to stabilise their economies in an increasingly shock-prone world.

“Clearly, when the finance ministers and central bank governors of our 190 member countries arrive in Washington next week, there will be plenty to discuss. But these leaders must not allow other challenges to crowd out the pressing needs of the world’s poorest nations.

Supporting the PRGT is an excellent way to keep this issue at the top of the global agenda,” the IMF added.

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