The G-20 finance ministers met this week, and while much of the resulting communique seemed to support previous efforts rather than move them forward, they did call for a new International Monetary Fund trust fund that could support middle-income countries.
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The fund: The proposed Resilience and Sustainability Trust at IMF would provide “affordable long-term financing” to low-income countries, small developing states, and vulnerable middle-income countries, according to the communique. The goal is to help these countries “reduce risks to prospective balance of payment stability, including those stemming from pandemics and climate change.”
The new fund would be a vehicle for countries to channel Special Drawing Rights, including those from IMF’s $650 billion allocation in August. While a key component of the discussions around the allocation was that the world’s wealthiest countries would use their new batch of SDRs to support other countries through IMF or other vehicles, those transactions have been slow to materialize.
A timeline for the fund is unclear.
Why it matters: Some middle-income countries have suffered tremendous economic losses as a result of the COVID-19 pandemic, but they have largely been excluded from most global financial and debt relief initiatives.
A report earlier this year from the United Nations Development Programme found that a group of 72 vulnerable countries will owe at least $598 billion in debt payments between 2021 and 2025. It also highlighted a key gap — a group of 23 countries owe 65% of those debt payments but don’t qualify for G-20 initiatives and cannot access low-cost capital in the way the world’s wealthiest countries do. Most of those countries are middle-income countries or small island developing states.
Many advocates, including representatives from these countries, have called for more support, and it appears that the G-20 is now responding.
About the author
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
