By Clara Nwachukwu
The International Monetary Fund (IMF), yesterday, announced the operationalization of its new Resilience and Sustainability Trust (RST), a facility currently worth $37billion to help vulnerable countries meet long-term challenges.
IMF Managing Director, Ms. Kristalina Georgieva, disclosed this during the on-going IMF/World Bank Group Meeting, holding in Washington, DC.
This $37 billion is the first round of RST resources, and represents just over half of the total of current RST pledges of special drawing rights, SDR 29 billion from 13 countries.
However, six countries, including Australia, Canada, China, Germany, Japan, and Spain provided the first round of resource contributions totalling SDR 15.3 billion ($20 billion).
The IMF said further contributions are expected to become effective in early 2023, once countries have completed their domestic procedures to ensure the RST is in a strong position to meet demand for RSF arrangements in the coming years.
It added that more countries are expected to pledge over time, while it continues fundraising efforts to broaden the pool of contributors and ensure that the RST has sufficient resources.
RST objectives
The IMF’s Executive Board approved the establishment of the RST in April 2022, to serve as a third pillar of the IMF’s lending toolkit, in addition to the General Resources Account (GRA), and the Poverty Reduction and Growth Trust (PRGT), and provides financing with a 20-year maturity and a 10½‑year grace period.
The RST will support eligible low and middle-income countries—comprising about three-quarters of the IMF’s membership.
“The RST will amplify the impact of the US$650 billion SDR allocation implemented last year by channelling resources from economically stronger members to countries where the needs are greatest.”
The RST is the IMF’s first ever facility to provide long-term affordable financing, which aims to support countries build resilience to structural challenges—such as climate change and pandemics—to help maintain longer-term economic and financial stability, while catalysing other public and private financing.
In a statement, Georgieva was quoted as saying: “Today, I notified the Executive Board that with our fundraising to date, the RST is ready to start lending operations.
“We promised, and we delivered. For that, I am immensely grateful to our members for coming together and showing solidarity in times of unprecedented challenges.”
The RST is the IMF’s first ever facility to provide long-term affordable financing, which aims to support countries build resilience to structural challenges—such as climate change and pandemics—to help maintain longer-term economic and financial stability…
Rationale behind the RST
The multilateral lender explained that the RST is the outcome of a series of global shocks witnessed in the last three years. “The world has lived through shock, after shock, after shock. First, the COVID pandemic. Then Russia’s invasion of Ukraine, and the ensuing cost-of-living crisis,” it said.
“And there is no pause button on the climate crisis while we deal with these other crises,” it added.
We are also preparing the ground for RST lending to support policies for pandemic preparedness, through good cooperation with other international institutions.”
Georgieva expressed her delight that “With the strong support of our members, we have achieved the ambitious goal that was set by the IMFC and the G-20 to make the RST operational around the time of the 2022 IMF/World Bank Annual Meetings.”
While looking forward to the initial set of requests in the coming months, the IMF chief said the Executive Board can start approving members’ requests for the Resilience and Sustainability Facility (RSF) arrangements.
“On the demand side, I am encouraged to see the strong interest from countries to access financing from the RST. 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,” she said.
