Updated March 23rd, 2024 at 11:48 IST

$21 billion IMF trust lending approved in funding bill: Janet Yellen

Yellen stressed that this funding would position the United States as the principal supporter of the IMF's Poverty Reduction and Growth Trust (PRGT).

Reported by: Business Desk
US Treasury Secretary Janet Yellen | Image:ANI
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IMF trust funding: Treasury Secretary Janet Yellen revealed on Saturday that the recently passed $1.2 trillion government funding bill includes provisions allowing the United States to lend up to $21 billion to an International Monetary Fund (IMF) trust, aimed at aiding the world's poorest nations.

Yellen stressed that this funding would position the United States as the principal supporter of the IMF's Poverty Reduction and Growth Trust (PRGT). 

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The PRGT offers zero-interest rate loans to assist low-income countries in stabilising their economies, fostering growth, and enhancing debt sustainability.

The bill's passage, secured with a Senate vote post-midnight, ensures the United States fulfils a commitment made by President Joe Biden and other leaders from the Group of 20 major economies over two years ago. 

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The commitment pledges $100 billion to support low-income and vulnerable countries grappling with the aftermath of the COVID-19 pandemic and facing macroeconomic challenges.

The PRGT serves as the IMF's primary mechanism for providing zero-interest loans to low-income nations, facilitating economic programs and catalysing additional financing from various sources, including donors, development institutions, and the private sector.

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Throughout the pandemic, the IMF reports having provided over $30 billion in interest-free loans through the PRGT to more than 50 low-income countries, mitigating instability in regions ranging from Haiti to the Democratic Republic of Congo and Nepal.

With demand for PRGT lending expected to soar to nearly $40 billion this year, notably surpassing historical averages, Yellen hailed the development as a crucial step in fulfilling the United States' commitment to supporting low-income nations. 

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She underscored the urgency of addressing economic scars from the pandemic, high debt vulnerabilities, climate risks, and spillovers from ongoing global conflicts.

Kevin Gallagher, director of Boston University's Global Development Policy Center, highlighted the importance of the long-awaited US funding, particularly amidst soaring interest rates in poorer countries, particularly in Africa, exacerbating existing debt burdens.

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However, Congress declined to authorise Treasury's proposals to allocate some funds to the IMF's Resilience and Sustainability Trust, designed to aid countries in addressing climate change and other pressing challenges.

Yellen reaffirmed Washington's enduring support for the IMF, recognising its pivotal role in the international monetary system through policy guidance, capacity building, lending, and stress upon governance and economic reforms.

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"I anticipate further collaboration with the IMF to address the needs of low-income countries," Yellen stated.

(With Reuters Inputs)

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Published March 23rd, 2024 at 11:48 IST