The IMF has approved the third tranche of grants for debt service relief for 28 Low-Income member countries. This is under the Catastrophe Containment and Relief Trust (CCRT). It enables the disbursement of grants from the CCRT for payment of all eligible debt services falling due from April 14, 2021, to October 15, 2021. The relief will cover the poorest and most vulnerable members, estimated at US$238 million.
This tranche of grants for debt service relief will continue to help free up scarce financial resources for vital emergency services. This will cover health, social, and economic support to mitigate the impact of the COVID-19 pandemic.
Also, the IMF noted it could provide debt service relief for the remaining period from October 16, 2021, to April 13, 2022. This amounted to a total of about US$964 million. However, the IMF stated that this is subject to the availability of sufficient resources in the CCRT.
Meanwhile, this approval follows two prior tranches approved on April 13, 2020, and October 2, 2020, respectively. In March 2020, Managing Director Kristalina Georgieva launched an urgent fundraising effort to raise US$1.4 billion in grants for the CCRT. This would enable the CCRT to provide financial assistance for relief on debt service for up to a maximum of two years. However, the IMF will do this while leaving the CCRT adequately funded for future needs. Thus far, donors have pledged contributions totaling about SUS$774 million.
Executive Board Assessment
Executive Directors welcomed the opportunity to consider the approval of grants under the CCRT. They noted that the COVID-19 pandemic continues to exact a severe human and economic toll on these countries. Moreover, they indicated that the first and second tranches of CCRT debt service relief had helped mitigate the impact of the pandemic.
Also, the Directors agreed that the available resources and pledges are sufficient to finance the third tranche of debt service relief for the period. Accordingly, they approved grant assistance under the CCRT for relief for 28 eligible members. These are the countries that have debt service falling due during this period.
Directors concurred that countries that received the CCRT grants for debt relief are generally pursuing appropriate macroeconomic policies. These are policies in response to the economic fallout from the global pandemic. They welcomed that several member countries were transitioning to Upper Credit Tranche-quality arrangements. This would provide a stronger policy framework for the recovery period. Directors also observed that most countries would benefit from a resumption of Fund surveillance. Some will also benefit from updated debt sustainability assessments.
Governance and transparency
Meanwhile, Directors noted the progress made in implementing governance safeguards commitments regarding COVID-19 related spending in CCRT-eligible countries. However, they regretted implementation delays in some countries. This is particularly in disclosing beneficial ownership information on entities awarded government contracts. As a result, the Directors underscored the importance of continued follow-through on the commitments on governance and transparency. The IMF noted that it may provide technical assistance if necessary.
Furthermore, the Directors welcomed the generous contributions that enabled debt relief through the third tranche. Many of them noted the recent large contribution by the European Union.
However, the Directors stressed that additional resources will be needed to provide the CCRT grants for debt relief beyond the proposed third tranche. According to them, efforts to secure additional resources to reach the funding target of SDR 1 billion should continue. This will ensure that adequate grant resources are in place for other CCRT-qualifying shocks in the future.
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