WASHINGTON, July 30 — The International Monetary Fund said yesterday it was mobilising up to US$17 billion (RM59.5 billion) in new resources to lend to 80 of the world's poorest countries seen most at risk from the global economic crisis.
The IMF announcement represented a major overhaul of the fund's previous lending practices as it tries to limit the damage from the global crisis, which seems to be ebbing in industrialised economies, but is still being felt in most of the developing world.
The Washington-based institution said demand for loans from poor countries, mostly in Africa, has exceeded its projections as government revenues have been strained by a sharp decline in global trade and investment as well as volatile commodity prices.
The fund said it would substantially increase resources for low-income countries by up to US$17 billion over the next six years. Lending in 2009 and 2010 is likely to hit US$8 billion, and will increase between US$2 billion and US$2.5 billion annually after that through 2014.
In the first six months of this year, the IMF has lent or committed about US$3 billion, which is more than the last three years combined.
Some of the resources used for the scaled-up lending will be raised through the sale of 403 tonnes of IMF gold stocks, which will probably be sold within a new central bank gold sales agreement currently being negotiated.
In addition, the IMF said it needed to raise some US$14 million from individual shareholder countries to subsidise the low-cost lending to its poorest members.
The Fund also said it will temporary freeze interest rate payments on outstanding credit for 60 low-income countries over the next 2½ years until the start of 2011.
"This is an unprecedented scaling up of IMF support for the poorest countries in sub-Saharan Africa and all over the world," IMF managing director Dominique Strauss-Kahn said.
The IMF said it had designed new lending instruments better suited for such countries' circumstances, including a standby credit facility which poor countries could tap when they need the funds. Currently, they are forced to draw down the entire loan by the end of an IMF programme.
"By adopting these measures, the IMF has transformed its relations with low-income countries and responded directly to an international consensus on how to respond to the global crisis," the IMF said.
It said the new instruments placed a "strong emphasis on poverty alleviation and growth," adding the programmes will include specific targets to safeguard social and other priority spending.
Meanwhile, the IMF has also streamlined conditions it attaches to its loans that now focus on the source of the problem, rather than trying to fix the entire economy, including areas where the fund often has no expertise.
In some cases, the IMF no longer requires countries to address certain problems before it releases a loan.
The IMF's new strategy for low-income countries comes as the IMF and its sister organisation, the World Bank, worry that the global crisis could derail economic progress in Africa, where annual growth averaged around 5 per cent to 6 per cent over most of the past decade.
Antoinette Sayeh, director of the IMF's Africa Department, said the fund was maintaining its 2009 growth forecast for Sub-Saharan Africa at 1.5 per cent. Excluding regional powerhouses South Africa and Nigeria, growth was expected to be 2 per cent in 2009, she added.
Sayeh also said the IMF had revised upward its forecast for the region next year to 4 per cent compared with an April forecast of 3.8 per cent. — Reuters
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