WASHINGTON: A $1.2 trillion government funding bill passed by Congress will allow the U.S. to lend up to $21 billion to an International Monetary Fund (IMF) trust to help the world’s poorest countries, U.S. Treasury Secretary Janet Yellen said on Saturday.
Yellen said the funding would make the United States the largest supporter of the IMF’s Poverty Reduction and Growth Trust (PRGT), which provides zero-interest rate loans to support low-income countries as they work to stabilize their economies, boost growth and improve debt sustainability.
President Joe Biden signed the bill on Saturday after the Senate passed after midnight, averting a government shutdown. The IMF spending will make good on a promise Biden made over two years ago with other leaders from the Group of 20 large economies to provide $100 billion to support low-income and vulnerable countries recovering from the COVID-19 pandemic and struggling with macroeconomic risks.
The PRGT is the IMF’s main vehicle for providing zero-interest loans to low-income countries to support their economic programs and help leverage additional financing from donors, development institutions, and the private sector.
Since the beginning of the pandemic, the IMF says it has supported more than 50 low-income countries with some $30 billion in interest-free loans via the PRGT, reducing instability in poor countries from Haiti to the Democratic Republic of Congo and Nepal.
The IMF expects demand for PRGT lending to reach nearly $40 billion this year, more than four times the historical average.
“Today’s development marks a key milestone in the United States meeting its commitment to provide support to low-income countries that are still bearing economic scarring from the pandemic, while responding to high debt vulnerabilities, climate risks, and spillovers from Russia’s war against Ukraine,“ Yellen said in a statement first reported by Reuters.
Kevin Gallagher, director of Boston University’s Global Development Policy Center, said the long-delayed U.S. funding came “just in nick of time, given exorbitant interest rates in poorer countries, especially in Africa,“ that have hit low-income countries hard, compounding already high debt burdens.
He noted that Congress had refused to approve Treasury’s plans to loan some of the funds to the IMF’s Resilience and Sustainability Trust, set up to provide funding for countries to work on climate change and other challenges.
Eric LeCompte, executive director of Jubilee USA Network, welcomed the U.S. funding for the PRGT, noting the trust had a history of bipartisan support.
“Increasing resources for efficient programs like this can lift people out of poverty in developing countries,“ he said.
No comment was immediately available from the IMF.
Yellen said the funding for the IMF reflected Washington’s ongoing support for the institution and the unique role it plays in the international monetary system through its policy advice, capacity development and lending and focus on good governance, robust economic reforms and necessary adjustment.
“I look forward to continuing our partnership with the IMF to support the needs of low-income countries,“ Yellen said.
