Wednesday July 29, 09:16 PM
IMF gears up for 'unprecedented' support of poor nations
By Veronica Smith
WASHINGTON (AFP) - The International Monetary Fund said Wednesday it was gearing up to deliver "unprecedented" support to poor nations amid the global economic crisis, putting 17 billion additional dollars to work.
The IMF executive board approved an increase in lending to low-income countries by up to 17 billion dollars through 2014 and the suspension of interest payments on outstanding loans through 2011.
"This is an unprecedented scaling up of IMF support for the poorest countries, in Sub-Saharan Africa and all over the world," said IMF managing director Dominique Strauss-Kahn.
About 80 of the world's poorest countries would be affected.
The IMF also announced it would launch a new set of lending instruments to help the poor countries cope with the crisis and strengthen their economies in the future.
Some of the new resources would come from a planned sale of a portion of IMF gold reserves, which still needs approval by the organization's Board of Governors.
The plan would allow the IMF to sell about one-eighth of its gold holdings, or around 403 tonnes.
As much as 8.0 billion dollars would be added to the lending resources for poor countries over the next two years, officials said.
Strauss-Kahn said the fund action followed a request from the Group of 20 (G20) developed and developing countries to help countries amid the worst global recession in decades, which has hit the poor countries particularly hard.
"We are responding with a historic set of actions in terms of support for the world?s poor. The new resources and new means of delivering them should help prevent millions of people from falling into poverty," he said.
The IMF noted that the ramp-up in resources exceeded the G20 call for 6.0 billion dollars in new lending over two to three years.
The fund said it would provide "permanently higher" easier lending terms for financial support, using a mechanism for updating interest rates after 2011.
In response to the worst economic crisis in decades, the IMF has already more than doubled its financial assistance to low-income countries.
The IMF also unveiled a toolbox of new financial instruments tailored for the needs of poor countries, including loans for short-term, medium-term and precautionary needs and a fast-track emergency loan.
The new instruments will focus on poverty alleviation and growth, and programs will safeguard social and other priority spending, the IMF said.
Earlier this year the Washington-based institution announced a more flexible approach to setting conditions on its loans.
"Since the crisis hit, we have been listening and responding to our member countries," Strauss-Kahn said.
"The scaling up of the IMF?s support not only will help these low-income countries weather a crisis that is not of their making. Once the crisis has passed, it also will pave the way for progress in the battle against poverty."
The IMF said its new lending commitments in Sub-Saharan Africa this year jumped to 2.7 billion dollars by mid-July, compared with 1.1 billion for the whole of 2008.
The IMF executive board recently endorsed his proposal to inject 250 billion dollars into member nations' foreign exchange reserves to boost liquidity amid the global economic crisis.
The proposal to allocate Special Drawing Rights (SDRs) equivalent to 250 billion dollars was by far the largest general allocation in the rarely used tool, the IMF said.
More than 18 billion dollars of the increase would help bolster the foreign exchange reserves of low-income countries.
If approved by the board of governors, representing the IMF's 186 member nations, the allocation would take place at the end of August.
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