The Strategist

IMF to offer concessional loans to middle-income countries

11/16/2021 - 09:20

The International Monetary Fund (IMF) plans to develop a concessional lending facility for low- and middle-income countries against the backdrop of climate change. This will particularly affect island states. The size of the fund will be $30-50 billion.
"In light of the climate crisis, we intend to develop a low-interest long-term lending instrument, with loans to be extended not only to low-income countries, but also to vulnerable middle-income countries, especially island nations," IMF Managing Director Kristalina Georgieva said at a debate at the fourth Paris Peace Forum.

The IMF thus wants to "participate in the landmark transformation of the world economy" towards a model that will not contribute to climate change. It is planned to be finalised by the IMF's spring session and implemented by the fund's annual meeting, which usually takes place in October. 

Ms Georgieva suggested that countries with strong financial reserves that do not need IMF help could transfer some of their Special Drawing Rights (SDR, the IMF's unit of account) to countries in need. She said the weakest economies will receive a small share of SDRs - 21 billion out of 650 billion, developing countries will receive 275 billion and the African continent will receive 35 billion.

The IMF approved a record 456 billion SDR ($650 billion) in August. $275bn will go to emerging market and developing countries.