July 23, 2020: The Executive Board of the International Monetary Fund (IMF) approved a temporary increase in the annual limits on overall access to resources in the General Resources Account and the Poverty Reduction and Growth Trust.
The severe impact of the COVID-19 pandemic on global economic conditions has resulted in an unprecedented number of member countries seeking financial support from the IMF.
As of July 13, 2020, 72 countries have already received financial assistance from the IMF’s emergency financing instruments since the onset of the pandemic, facilitated by the doubling of annual access limits under these facilities approved by the Executive Board on April 6. Further requests for assistance, the majority of which are likely to be met through the IMF’s regular lending instruments, are expected in the months ahead.
IMF lending is subject to an annual limit on the access to resources that a country can obtain from its general resources and a separate annual limit on access under its concessional facilities. Many of the countries that have received financial support from the IMF since the onset of the pandemic have reached, or are approaching, the relevant annual access limits. Requests for financial assistance in excess of these annual limits trigger application of the relevant exceptional access framework, where the request is subject to tighter scrutiny and can be approved only if specified criteria are met.
Given the unique circumstances created by the pandemic, the IMF’s Executive Board approved temporary increases in these annual access limits, to remain in effect through April 6, 2021. This will allow member countries to obtain higher levels of financial support during this time period without triggering the application of the exceptional access framework. The existing limits on cumulative access are unaffected by this temporary change.
The Executive Board also approved the temporary suspension of the limit on the number of disbursements under the Rapid Credit Facility (RCF) through April 6, 2021. This allows emergency financing to the IMF’s poorest member countries to be provided more frequently over the course of a year, provided that the combined amounts of support provided under the RCF does not exceed the annual limit on access under this facility.
The IMF and the World Bank, along with other multilateral financial institutions, are providing credit facilities and grants to help the poorest nations to strengthen their health infrastructure and deal with the economic fallout from the pandemic. In April, the group of the world’s 20 biggest economies also agreed on the time-bound Debt Service Suspension Initiative (DSSI) for poor countries, allowing suspension of debt until the end of this year.
So far, 42 countries have asked for assistance under the scheme, resulting in the deferral of about $5.3 billion in debt repayments. The G20 last week said it will consider extending the initiative when its financial policymakers meet later this year.
The initiative stands to benefit 73 members of the International Development Association on a debt service plan with the IMF and the World Bank, as well as the least developed nations as defined by the United Nations.
“The Covid-19 pandemic had triggered a uniquely severe synchronized shock across the global economy and an ensuing surge in requests for financial support under the fund’s emergency financing instruments,” the IMF said on Wednesday.