New IMF facility ready to start offering loans to vulnerable nations

The Resilience and Sustainability Trust will help countries deal with climate change and pandemics, says IMF chief Kristalina Georgieva

IMF managing director Kristalina Georgieva said there is 'no pause button on the climate crisis', while the world deals other problems. AFP

The International Monetary Fund's Resilience and Sustainability Trust — the lender's first facility to provide long-term affordable financing to help countries deal with structural challenges such as climate change and pandemics — is now operational, its managing director Kristalina Georgieva has said.

The RST, which has received pledges of $37 billion from 13 countries so far, is now ready to start lending to low-income and most middle-income countries, she said on Wednesday.

She expressed her "immense gratitude" to Australia, Canada, China, Germany, Japan and Spain, which have provided the first round of resource contributions amounting to $20bn.

There is "no pause button on the climate crisis", while the world deals other crises, Ms Georgieva said.

The RST will help countries "maintain longer-term economic and financial stability, while catalysing other public and private financing", she said.

The IMF’s executive board approved the establishment of the RST in April to complement the fund's other lending platforms: the General Resources Account (GRA) and the Poverty Reduction and Growth Trust (PRGT).

The trust provides financing with a 20-year maturity and a 10.5‑year grace period. It will support eligible low and middle-income countries — comprising about three quarters of the IMF’s membership.

It allows economically stronger IMF members to channel their Special Drawing Rights, or emergency reserves, to help vulnerable countries.

"Further contributions are expected to become effective in early 2023 once countries have completed their domestic procedures, ensuring the RST is in a strong position to meet demand for RSF [resilience and sustainability facility] arrangements in the coming years," Ms Georgieva said.

"Additional countries are expected to pledge over time, and we will continue our fundraising efforts to broaden the pool of contributors and ensure that the RST has sufficient resources."

On the demand side, the trust has already received "strong interest" from countries.

"We are already in advanced discussions with a diverse group of countries in their climate policy actions. The IMF is building experience with this new instrument through this initial phase, and lessons from these cases will benefit the broader group of eligible countries in the future," Ms Georgieva said.

"We are also preparing the ground for RST lending to support policies for pandemic preparedness, through good co-operation with other international institutions.”