The International Monetary Fund (IMF) Executive Board has decided to temporarily increase the limits for accessing the Poverty Reduction and Growth Trust (PRGT).
The normal annual access limit, which dictates how much a country can borrow in a single year, has been raised to 200% of quota.
Additionally, the normal cumulative access limit, which is the total amount a country can borrow over time, has been increased to 600% of quota.
These adjustments are in effect until the end of 2024. This is a measure aimed at providing more financial support to countries facing economic challenges during this specific time frame.
The mentioned changes aim to provide enhanced assistance to the Fund’s low-income members, like Ghana, amid a difficult and unpredictable global economic situation.
The goal is to offer improved support tailored to the specific challenges these countries face.
The PRGT (Poverty Reduction and Growth Trust) serves as the concessional lending arm of the International Monetary Fund (IMF).
Concessional means that the loans provided have favorable terms, and currently, they come with zero percent interest rates. This is designed to make financial assistance more accessible and affordable for countries facing economic challenges, especially those with lower income levels.
The zero percent interest rates aim to alleviate the financial burden on these countries as they work towards poverty reduction and sustainable economic growth.
In March 2023, the IMF Executive Board made a decision to conduct an interim review of the PRGT (Poverty Reduction and Growth Trust) access limits.
The review was contingent on achieving substantial progress toward the PRGT’s first stage fundraising target of SDR 2.3 billion. This fundraising goal was successfully met in October 2023, thanks to the contributions of over 40 countries.
The accomplishment of this target paved the way for the planned interim review, which likely involves assessing the effectiveness of the PRGT and potentially adjusting access limits based on the achieved funding levels and the evolving needs of member countries.
The concessional lending through the Poverty Reduction and Growth Trust (PRGT) by the International Monetary Fund (IMF) is governed by specific access limits. These limits were last reviewed in July 2021, establishing normal annual and cumulative access limits at 145% and 435% of quota, respectively. Quota refers to a member country’s financial commitment to the IMF.
However, in March 2023, the General Resources Account (GRA) access limits, which are applicable to non-concessional lending, were temporarily increased to 200% and 600% of quota.
This adjustment in GRA access limits reflects changes in the global economic landscape. The mention of aligning PRGT access limits with the prevailing GRA access limits indicates a coordination between concessional and non-concessional lending frameworks within the IMF.
This alignment ensures a coherent and responsive approach to the diverse financial needs of member countries in varying economic conditions.
The temporary increase in PRGT access limits provides greater flexibility for the International Monetary Fund (IMF) to offer support to countries facing substantial balance of payments challenges.
This flexibility enables the Fund to assist these countries in implementing robust economic programs aimed at either maintaining or restoring sustainable economic positions.
The emphasis on “inclusive growth” suggests that the programs supported by the increased access limits aim not only for economic stability but also for fostering broader social and economic development that benefits a wide range of the population.
Essentially, the adjustment in access limits is a tool to better address the unique needs of countries with significant economic challenges, promoting both stability and inclusivity.
The upcoming Review of the Fund’s Concessional Facilities and Financing, set to be finalized in the Fall of 2024, will encompass an assessment of various aspects. Firstly, it will cover a review of concessional facilities, which includes an examination of access limits. This involves evaluating how much financial support member countries can receive through these facilities.
Additionally, the review will extend to the financing of the Poverty Reduction and Growth Trust (PRGT). This entails assessing the resources available to the PRGT, focusing on measures to ensure its long-term financial sustainability.
This broader review aims to optimize the effectiveness of concessional support provided by the International Monetary Fund (IMF) to member countries, aligning it with evolving global economic conditions and the diverse needs of these nations.