Why IMF Lending Continues to Adapt
Helping vulnerable countries make needed adjustments will foster economic stability and growth and unlock additional financing from other sources
The world confronts the weakest medium-term growth outlook in three decades amid high debt levels, fragmented trade, and the prospect of higher-for-longer interest rates. In this environment, the IMF is redoubling its efforts to promote stability and growth.
All countries grapple with uncertainty from shocks related to the pandemic, war in Ukraine, and transformational challenges such as climate change and digitalization. Several emerging market and developing countries have shown remarkable resilience. But many—especially low-income countries—are increasingly vulnerable amid tighter financial conditions, limited policy room for maneuver, and dwindling buffers.
These countries also face a funding squeeze, heightened food insecurity, and a slower convergence toward higher living standards. High debt burdens and a sharp increase in debt servicing costs—exceeding 40 percent of revenues in several highly indebted countries—leave little space for social spending and growth-enhancing investment. This adversely impacts debt sustainability and social stability.
The IMF is responding to calls to play an even greater role to support our member countries during these very challenging times, importantly through the provision of balance of payments financing and policy advice.
Crises and channeling
To be sure, the Fund acted to help members address balance-of-payments needs from recent shocks. This includes providing emergency financing and temporarily increasing access limits for Fund arrangements. We approved precautionary financing arrangements and established a Short-term Liquidity Line that serves as a backstop for members with very strong fundamentals. We responded to the global food crisis stemming from Russia’s war in Ukraine by introducing a Food Shock Window in September 2022 to help countries facing urgent balance of payments needs related to food insecurity.
Since the pandemic, we have deployed $1 trillion in global liquidity and reserves through our lending and the 2021 allocation of $650 billion in special drawing rights, or SDRs. We have provided around $320 billion in financing to 96 countries. We have increased five-fold our interest-free financing to 56 low-income countries through our Poverty Reduction and Growth Trust. And we have worked with economically stronger members to channel a significant share of their SDRs to more vulnerable countries, generating around $100 billion in new financing through IMF trusts such as the PRGT and the Resilience and Sustainability Trust introduced last year.
As a result, the IMF has committed unprecedented financial resources to members. As of September, the IMF has lending commitments with 94 countries for about $287 billion, or SDR 218 billion. This includes:
- Precautionary facilities for seven emerging market economies for $93 billion
- Lending commitments for 35 emerging market economies for $134 billion
- Interest-free lending of $23.5 billion for 45 low-income countries
- $30.5 billion of outstanding credit on emergency financing for 77 countries
- Long-term loans of about $6 billion to 11 emerging market economies under the RST’s Resilience and Sustainability Facility. Around 40 more countries have requested or expressed interest in an RSF arrangement.