By Andrea Shalal
WASHINGTON (Reuters) – The International Monetary Fund is exploring creation of a new trust that could allow its members to lend their IMF reserves to a broader range of countries, including middle-income countries vulnerable to climate change, IMF chief Kristalina Georgieva said on Sunday.
Georgieva said leaders of the Group of Seven rich economies had given the IMF a ‘green light’ to keep working on the plan, and China – the world’s second largest economy – had also expressed interest, along with middle income countries that could benefit from such a fund.
She said the IMF would continue working on the “Resilience and Sustainability Trust” – which could help countries combat climate change or improve their health care systems – ahead of the July meeting of finance officials from the Group of 20 major economies, which includes China.
“Now we have the indication that we have a green light to go ahead, and we will reach out to others,” Georgieva told Reuters in an interview after the end of the G7 leaders summit in Cornwall, England.
“China has expressed interest to participate, and I would expect there could be other emerging market economies with sound fundamentals and strong reserve positions that may also do the same,” she said.
G7 leaders on Sunday said they welcomed an expansion of the global lender’s emergency reserves by $650 billion, and backed a global target of providing $100 billion to the most vulnerable countries, but said other countries should participate.
Georgieva said she would work with IMF members in the coming months on how they could re-allocate some of their SDRs or use budget loans to reach – or even exceed – the $100 billion goal.
The IMF expects its board to formally approve the $650 billion SDR allocation in August, paving the way for member countries to donate their unneeded reserves to others in need.
The previously unreported new trust could help broaden the effort and make funds available to more countries, and for broader initiatives, in line with global goals for combating climate change.
The IMF already has a vehicle – the Poverty Reduction and Growth Trust – that allows members to share their IMF reserves, known as Special Drawing Rights, with the poorest countries.
However, small island states and other middle-income countries that have been hit hard by the coronavirus pandemic and significant economic downturns, are not eligible for funding through that IMF vehicle.
(Reporting by Andrea Shalal; editing by Diane Craft)
