A $1.2 trillion government funding bill recently cleared by Congress marks a significant stride for the United States, enabling the provision of up to $21 billion to an International Monetary Fund (IMF) trust aimed at aiding the world’s most impoverished nations, as affirmed by U.S. Treasury Secretary Janet Yellen on Saturday.
Yellen emphasized that this allocation solidifies the United States as the principal benefactor of the IMF’s Poverty Reduction and Growth Trust (PRGT).
The PRGT extends interest-free loans to bolster the efforts of low-income countries in stabilizing their economies, fostering growth, and enhancing debt sustainability.
President Joe Biden promptly signed the bill into law on Saturday following its passage by the Senate, preventing a looming government shutdown. This financial commitment to the IMF aligns with a pledge made by Biden and other leaders of the Group of 20 major economies more than two years ago.
The promise entails providing $100 billion to support the recovery of low-income and vulnerable nations grappling with the aftermath of the COVID-19 pandemic and confronting macroeconomic challenges.
The PRGT serves as the primary conduit through which the IMF extends zero-interest loans to low-income nations, aiding in their economic endeavors and facilitating the mobilization of additional financing from various sources such as donors, development institutions, and the private sector.
Following the onset of the pandemic, the IMF reports having provided over $30 billion in interest-free loans through the PRGT to more than 50 low-income countries. This assistance has played a pivotal role in mitigating instability in nations ranging from Haiti and the Democratic Republic of Congo to Nepal.
Forecasts from the IMF indicate a surge in demand for PRGT lending, expected to reach nearly $40 billion this year, surpassing the historical average by more than fourfold.
U.S. Treasury Secretary, Janet Yellen, stated in a statement that the latest development is a significant milestone in fulfilling the United States’ commitment to offering assistance to low-income countries grappling with enduring economic ramifications of the pandemic.
She underscored the importance of addressing elevated debt vulnerabilities, climate-related risks, and the spillover effects stemming from Russia’s conflict with Ukraine.
Kevin Gallagher, who serves as the director of Boston University’s Global Development Policy Center, emphasized the timeliness of the long-awaited U.S. funding, particularly in light of the steep interest rates prevalent in many poorer nations, particularly in Africa.
These high-interest rates have exacerbated the challenges faced by low-income countries, compounding their already significant debt burdens.
Gallagher highlighted that Congress had previously declined to greenlight the Treasury’s proposals to allocate some of the funds to the IMF’s Resilience and Sustainability Trust, which was established to offer financial assistance to countries addressing climate change and related issues.
Eric LeCompte, the executive director of the Jubilee USA Network, expressed appreciation for the U.S. funding allocated to the PRGT, pointing out the trust’s history of receiving bipartisan support.
“Increasing resources for efficient programs like this can lift people out of poverty in developing countries,” he said.
No immediate comment was available from the IMF.
Yellen highlighted that the funding for the IMF underscored Washington’s enduring commitment to the institution and its distinctive role in the international monetary system.
She emphasized the IMF’s contributions through policy guidance, capacity building, lending facilities, and its emphasis on fostering good governance, implementing robust economic reforms, and facilitating necessary adjustments.
“I look forward to continuing our partnership with the IMF to support the needs of low-income countries,” Yellen remarked.
