IMF strengthens debt relief trust to enable support to eligible low-income countries in the aftermath of COVID-19 pandemic
March 27, 2020
In direct response to the COVID-19 crisis, the Executive Board of the International Monetary Fund (IMF) adopted immediate improvements to its Containment and Disaster Relief Trust (CCRT) to enable the Fund to reduce the debt service of its poorest and most vulnerable members. The CCRT enables the IMF to provide debt relief grants to eligible low-income countries following catastrophic natural disasters and major rapidly spreading public health emergencies.
The COVID-19 outbreak and associated global economic turmoil create a critical need to support Fund members, including exceptional balance of payments support for the poorest members particularly affected by the pandemic. Well-targeted support will enable these countries to prioritize medical expenditure and health-related needs as well as other immediate needs in a difficult economic environment, characterized by sharp declines in income, loss of income and higher expenses.
Against this background, the IMF Executive Board approved CCRT modifications that broaden the qualification criteria to better cover the circumstances created by a global pandemic and to focus on providing support for the needs most. immediate. Specifically, the decision will allow all member countries with per capita income below the World Bank’s operational threshold for concessional support to qualify for debt service relief for a period of up to two years. . This would apply when a potentially deadly global pandemic inflicts severe economic disruption to all IMF members and creates balance-of-payments needs of such magnitude to justify a concerted international effort to support the poorest countries and countries. more vulnerable.
The IMF has also launched a fundraising exercise that would see the Trust provide around $ 1 billion for the current pandemic. Ms. Georgieva called on the Fund’s economically stronger member countries to help rebuild the CCRT, which only had $ 200 million for the world’s poorest countries. Great Britain replied with a pledge of £ 150million ($ 183 million). Other donors, including Japan and China, are also making significant contributions.
“The revamped IMF Containment and Disaster Relief Trust can now provide rapid debt service relief on IMF bonds to more of our poorest and most vulnerable members. This will help them channel more of their scarce financial resources into life-saving emergency medical supplies and other relief, ”said IMF Managing Director Kristalina Georgieva. “In addition, we call on donor countries to replenish the resources of the Trust Fund to help strengthen our capacity to provide additional debt service relief to our poorest member countries.”
CCRT enables the IMF to support international debt relief efforts when poor countries are hit by severe natural disasters or battling public health crises – like the current coronavirus pandemic – with grants for relief debt service.
An earlier version of CCRT was used to provide approximately $ 270 million in aid to Haiti in 2010 to respond to the earthquake. It was then updated in 2015 to provide nearly $ 100 million in grants to the three countries most affected by the Ebola crisis, namely Guinea, Liberia and Sierra Leone.