WASHINGTON: The International Monetary Fund’s (IMF) executive board has approved the creation of a new facility to help low-income and most middle-income countries deal with longer-term challenges such as climate change and pandemics.

       IMF managing director Kristalina Georgieva announced the approval of the new Resilience and Sustainability Trust (RST) in a statement after the board meeting, and said it would take effect from May 1, with a goal of raising at least US$45bil (RM190bil).

       She said the trust would amplify the impact of last year’s US$650bil (RM2.7 trillion) allocation of IMF Special Drawing Rights by allowing richer members to channel their emergency reserves to allow vulnerable countries to address longer-term challenges that threatened their economic stability.

       “This historic decision embodies the spirit of multilateralism,” she said in a statement to Reuters. “It shows that when there is the need and there is the will, we can work together to achieve a significant outcome for the benefit of all.”

       IMF staff hammered out details of the new facility in recent months after it won the backing of the Group of 20 major economies in October.

       An IMF staff paper prepared for the board and viewed by Reuters said nearly three-quarters of the IMF’s 190 members would be eligible to borrow from the RST, the IMF’s first facility set up expressly to help countries manage balance of payments risks posed by longer-term challenges, the paper said.

       “Today, even as IMF member countries confront the immediate challenges of rising inflation, constrained fiscal space and pandemic recovery – heightened by risks associated with the war in Ukraine – they are also calling on the fund to help respond to longer-term challenges such as climate change and pandemic preparedness,” the paper said.

       Currently, the IMF offers low-cost and zero-interest rate financing to help countries deal with short-term challenges, such as capital flight, inflation or high commodities prices, and medium-term fiscal and financial challenges.

       But until now it lacked a facility to help countries manage risk to balance payments posed by longer-term threats, and its Poverty Reduction and Growth Trust was open only to low-income countries.

       The RST, first proposed by Georgieva last June, will fill those gaps, offering a broader range of countries affordable financing over extended repayment periods, with a 20-year maturity and a 10？-year grace period.

       The IMF has said it plans to begin lending under the programme by October. The funding will be available to low-income and most middle-income countries, including all small developing states, the IMF said. Many of those states were hit particularly hard by the pandemic and its economic impact. — Reuters