The International Monetary Fund (IMF) has approved a new allocation of Special Drawing Rights (SDR) equivalent to 650 billion U.S. dollars to combat COVID-19 crisis.
IMF proposes $50bn Resilience and Sustainability Trust Fund for Nigeria, other low, middle-income countries
The International Monetary Fund (IMF) is proposing a $50 billion Trust Fund for low and vulnerable middle-income countries including Nigeria.
The $50-billion trust fund would also be a place where countries could channel their Special Drawing Rights to more vulnerable nations.
About three quarters of the IMF’s membership would be eligible for RST financing. This would include all low-income countries, all developing and vulnerable small states, and all middle-income countries with gross national per-capita income of less than roughly $12,000 per year.
In a blog post published on Thursday, it explained that the fund was targeted at helping countries in that category to build resilience and sustainability.
“A proposed $50-billion trust fund could help low-income and vulnerable middle-income countries build resilience to balance of payments shocks and ensure a sustainable recovery,” said the Washington-based institution.
“Even as countries continue to battle COVID-19, it is crucial not to overlook the longer-term challenge of transforming economies to become more resilient to shocks and achieve sustainable and inclusive growth.
“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 fund comes as part of the $650 billion Special Drawing Rights (SDRs) – an equivalent of about SDR456 billion – issued by IMF in August last year to help vulnerable countries boost liquidity through Resilience and Sustainability Trust (RST).
Recall that Nigeria was allocated about $3.35 billion of the sum, as part of the historic general allocation of SDRs of the IMF.
The amount allocated to Nigeria is as a result of the exchange rate of reference which is 0.702283 SDR to a dollar, and Nigeria has 2.4545 billion SDRs as of July 1, 2021.
In its latest blog post, the financial institution identified climate change as another long-term challenge that threatens macroeconomic stability and growth in many countries through natural disasters and disruptions to industries, job markets, and trade flows, among others.
It believes it is the shared responsibility of individual countries and the international community to overcome these global public policy challenges and it is time to take appropriate actions.
“In a previous blog, we explained how the IMF is considering options for channelling some of the $650 billion SDRs issued in August 2021 from countries with strong external financial positions to vulnerable countries through a Resilience and Sustainability Trust, or RST,” it said. “The RST’s central objective is to provide affordable long-term financing to support countries as they tackle structural challenges.
“As we’ve continued to work toward developing the RST, our current thinking on the key design features—which we outline further below—aim to balance the needs of potential contributors and borrowing countries.
“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.”
