Washington, D.C. — The Executive Board of the International Monetary Fund (IMF) has approved a significant reform and financing package for the Poverty Reduction and Growth Trust (PRGT), aimed at enhancing support for low-income countries facing unprecedented economic challenges. The initiative includes an $8 billion subsidy over the next five years, designed to provide essential concessional financing.
IMF Managing Director Kristalina Georgieva emphasized the importance of this reform, stating that the package will enable the IMF to tailor its support to the specific needs of individual countries, recognizing the increasing economic diversity among low-income nations.
Increased Lending Capacity
The new framework allows for the deployment of IMF net income and reserves to generate additional resources, with the goal of raising the PRGT’s annual lending capacity to $3.6 billion—more than double the pre-pandemic level. This increase is expected to stimulate further contributions from both public and private sectors, a crucial move as low-income countries grapple with significant financing needs exacerbated by global economic shocks.
The IMF aims to channel these resources toward supporting sound economic policies and building resilient institutions in low-income countries.
New Interest Rate Mechanism
To ensure that concessional resources are effectively targeted, the IMF has introduced a new interest rate mechanism. This mechanism will maintain interest-free lending for the poorest countries while ensuring that lending terms for others remain sufficiently concessional. Access policies will be designed with flexibility, allowing the IMF to adapt its assistance to the unique circumstances of individual nations.
Georgieva noted, “Our global membership has demonstrated its shared commitment to support low-income members during these challenging economic times.”
Context and Implications
The World Bank defines low-income economies as those with a GNI per capita of $1,145 or less in 2023. As of 2024, the IMF lists 68 low-income countries, including nations such as Afghanistan, Bangladesh, and Mozambique.
This comprehensive reform package is a crucial step in addressing the financial needs of these vulnerable countries, promoting economic stability and growth in a challenging global environment. As the IMF implements these changes, it seeks to bolster investor confidence and encourage sustainable economic practices across the affected regions.
