IMF board to approve new Trust for climate goals and pandemic preparedness; Recourse calls for bolder steps

Recourse joined 16 CSO partners yesterday in issuing an open letter to G20 Finance Ministers, Central Bank Governors and the IMF calling for a new US$2.5 trillion issuance of reserve assets called Special Drawing Rights (SDRs).

The IMF’s executive board convenes today, 13 April, to approve a structure for a new Resilience and Sustainability Trust (RST) that we believe will fail to re-distribute these SDRs in a way that addresses the needs of those countries that need the SDR resources most.

If approved, the IMF will start seeking a targeted $30 to $50 billion USD of contributions. Speaking in an event Recourse co-sponsored earlier this week as part of the Civil Society Policy Forum at the IMF Spring Meetings, an IMF representative indicated that they hope to make the first RST-approved loans before the end of this calendar year.

The potential for SDRs to help poorer countries during this period of acute financial and fiscal pressure is considerable. Our letter points out that the direct receipt of SDRs received last year “without conditions and additional debt burdens, soon became the most impactful tool developing countries effectively accessed amidst insufficient support for crisis response.” However, “because of the rules governing their distribution, more than $400 billion in SDRs went to advanced economies that do not need them.” It is these otherwise dormant funds that the RST is supposed to re-channel to support pandemic preparedness and the additional financial burden from meeting countries’ own climate related commitments.

The currently-proposed RST structure will fall short of the  ‘re-channeling’ principles we and other CSOs proposed last September. Today we urge decision-makers to make the RST and the use of ‘re-channeled’ SDRs fit for the purpose that the Managing Director herself set out before the COP26 meetings, saying that the Trust “will be there to provide long-term financing on concessional terms to vulnerable countries, small island states, countries affected by droughts and floods—so they can have the financial resources necessary to be strong in the face of climate shocks to come.”

Recourse and our partners believe that this will not be achieved. To do so the IMF’s shareholders and their board representatives must allocate an additional US$2.5 trillion in SDRs as soon as possible and take the steps needed to redistribute surplus SDRs from rich countries to those that need it most.