The Executive Board of the International Monetary Fund (IMF), has adopted a set of proposals to enhance the access of developing countries to IMF financial support. These proposals, and the case for adopting them, are contained in the staff paper “Financing for Development: Enhancing the Financial Safety Net for Developing Countries.”
The staff paper makes proposals to strengthen the financial safety net for developing countries by increasing access to concessional Fund resources for all Poverty Reduction and Growth Trust (PRGT)-eligible countries and to fast-disbursing support under the Rapid Financing Instrument (RFI) for all members when faced with urgent balance of payments needs. Developing countries’ efforts to achieve sustained and inclusive growth remain vulnerable to global volatility in the form of external shocks, unpredictable sudden stops and reversals of capital inflows, and significant commodity price volatility. Enhanced access to Fund financing provides countries with greater flexibility to meet balance of payments needs as they pursue inclusive growth and poverty reduction.
The proposals aim to provide developing countries with greater access to Fund resources while better targeting access to concessional resources towards the poorest and most vulnerable countries. The proposals include: i) increasing access to Fund concessional resources for all countries eligible for the Fund’s PRGT; ii) rebalancing the mix of concessional to non-concessional financing towards more use of non-concessional resources for better-off PRGT-eligible countries that currently receive “blended” financial support from the Fund; iii) increasing access to fast-disbursing concessional and non-concessional resources for countries in fragile situations, hit by conflict, or natural disasters, and (iv) setting the interest rate on loans under the Rapid Credit Facility (RCF) at zero percent.
