IMF secures funding for LICs
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Article summary
Countries, amounting to 90 per cent of voting rights, have given agreement to transfer their IMF allocations from gold sales to low income countries.
In late September, 150 of the Fund’s 188 members signalled agreement to transfer 1.75 billion in special drawing rights (about $2.7 billion) to the Fund’s Poverty Reduction and Growth Trust (PRGT). The resources will subsidise IMF concessional loans to low-income countries (LICs), which currently carry zero interest. This follows the IMF’s September 2012 decision to commit windfall profits to finance this lending on the condition that it received member commitments to reinvest at least 90 per cent of the resources from the 2009 and 2010 IMF gold sales in a zero-interest loan program for poor countries (see Update 82). The newly-secured funding will allow the IMF to lend an average of $1.9 billion dollars annually to its low-income members until at least 2015. However Tim Jones from UK NGO Jubilee Debt Campaign was critical of what Fund managing director Christine Lagarde called a “historic milepost”: “This decision provides the IMF with more money to bailout reckless lenders whilst the debt remains with the country. Instead we need mechanisms to cancel unjust and unsustainable debts, and equitable economic progress. The result of this would be IMF lending falling rather than increasing.”
