The International Monetary Fund (IMF) will be committing $40 billion to Nigeria and 11 other African economies under a new Resilience and Sustainability Trust (RST), which will be operationalised later this year.
The IMF Managing Director, Kristalina Georgieva, and Moroccan Minister of Economy and Finance Ms. Nadia Fettah, broke the news at the end of the World Bank/IMF Spring Meetings in Washington D.C.
Georgieva said the Resilience and Sustainability Trust would be funded by Special Drawing Rights (SDRs) channelled from donor countries.
It will complement the IMF’s lending toolkit by providing longer-term affordable financing to address longer-term challenges, including climate change and pandemic preparedness.
“The African Consultative Group (ACG) welcomed initial pledges of about $40 billion toward financing the RST, and urged other contributors to make additional pledges to ensure the RST is well-positioned to support African countries to address their long-term challenges and build resilience,” Fettah, who is the Chair of the African Caucus of ACG, said in a statement.
Libya, Ghana, and Egypt, among others, also members of the ACG, will also benefit from the fund.
The ACG comprises the Fund Governors of a subset of 12 African countries belonging to the African Caucus (African finance ministers and central bank governors) and Fund management.
“The group also underscored the need to address rising debt vulnerabilities of developing countries, particularly in Africa and find effective ways to alleviate the weight of the debt service. It also stressed the need to continue working together to strengthen the debt resolution architecture, including by improving the Common Framework for debt treatments and technical assistance within the Multipronged Approach (MPA) to address the remaining capacity requirements.”
Georgieva said: “Our discussions on Africa’s challenges and prospects for recovery have been very fruitful. Today the green shoots of the recovery that started in 2021 are threatened by the war in Ukraine at a time when the war on COVID-19 is still not over.
“Although the continent’s fuel and commodity exporters will experience a windfall gain, the positive fiscal impact could be largely offset by additional energy and food subsidies. In contrast, high food and energy prices are straining commodity importers’ external and fiscal balances. Capital flows are also likely to be disrupted.
“We agreed that the top priority must be to protect the most vulnerable households from the impact of high food and energy prices. But the external shock is hitting the continent at a time when most countries have limited fiscal space, with high debt vulnerabilities and increased risks. In this challenging context, targeted, temporary, and transparent support to vulnerable households using and further developing social safety nets would be the most appropriate solution.
“For this effort to succeed, governments in the region, the international community, and the private sector should make concerted efforts to mobilise revenue and additional financing to support the recovery and implement needed reforms to promote inclusive and sustainable growth, achieve diversification, tackle the climate crisis, and transition to a green economy.
“The IMF has been playing its part and reformed its concessional lending toolkit for low-income countries to provide greater flexibility to the access levels. It provided emergency financing to countries with urgent balance of payments needs, debt service relief under the Catastrophe Containment and Relief Trust (CCRT) to the most vulnerable countries and enacted an historical Special Drawing Rights (SDR) allocation.”
The SDR allocation boosted liquidity and reserves around the world. About S$34 billion was allocated to Africa countries, equivalent in six per cent of me countries’ Gross Domestic Product (GDP)
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