THE International Monetary Fund (IMF) says it needs a total of $4.7 billion to close the loan resource gap in Africa as it intensifies plans to hold its annual meeting in Morocco in October.
The meeting will be IMF’s first in 50 years, its Director-General, Kristalina Georgieva, said on Wednesday, April 12 at the ongoing IMF/World Bank Spring meeting holding in Washington D.C., United States.
Georgieva disclosed that the IMF urgently needed to provide $1.6 billion support to the continent.
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“As an urgent first step, what I called for is to provide pledges of $1.6 billion; we need $4.7 billion to close the loan resource gap. We have to work together to close this gap,” the IMF chief said as she called on the international community to support the world’s poorest countries.
Africa and other low-income countries have been impacted severely by multiple economic shocks in recent years.
Georgieva noted that the IMF and World Bank were no longer providing emergency financing, but are having very strong demand from countries for ‘Upper Credit Tranche programmes’, which could help countries build fundamentals and create opportunities for growth and employment for their people.
An upper credit tranche is a policy the IMF uses to make credit available in four tranches (segments) to countries, each tranche equals to 25 per cent of a member’s quota.
“We know that at a time when the global economy is still experiencing multiplicity of challenges – slow growth, higher inflation – for these countries, it translates into holding them back in their aspirations to catch up with the better us,” she said.
She explained that, technically, every dollar committed in Poverty Reduction and Growth Trust (PRGT) subsidies translates into $5 of interest-free lending.
Georgieva, stressing on closing the loan gap by October, said the IMF could restore access to concessional financing for PRGT eligible countries at par with access for Generalized System of Preferences (GSP) eligible countries.
The ICIR can report that the concessional support through the PRGT is currently interest-free.
She noted that in addition to the increase in demand, countries are experiencing higher interest rates that make bringing down the cost of lending to low-income countries harder, and, as a result, the resource gap for the PRGT has grown.
In March 2020, when the World Health Organisation (WHO) announced the start of the Covid-19 pandemic, all countries were faced with tremendous uncertainties, particularly for low income countries, the IMF boss recalled.
But since the start of the pandemic, the IMF has provided $24 billion in support through the PRGT, alleviating people’s suffering and preventing instability from spreading beyond borders, she said.
According to her, per capita income growth for 2023/2024 was projected at 2.8 per cent, the lowest per capita growth since 1990.
“That puts them in further divergence unless we act,” Georgieva added.
Per capita income is used to determine the average per person income for an area, and to evaluate the standard of living and quality of life of the population.