Spain pledges $1.9 billion to IMF new sustainability trust
- Country says it’s first to channel funds to resilience trust
- $45 billion trust aims to help fiscally vulnerable countries
Spain will contribute 1.86 billion euros ($1.9 billion) to a new International Monetary Fund trust to bolster financing to countries struggling with the pandemic and the fallout of the war in Ukraine.
The European country has approved the allocation of funds to the Resilience and Sustainability Trust, making it the first to do so, the economy ministry said in a statement Monday. The IMF has a goal of raising about $45 billion for the new trust, mostly through rich nations onlending part of their IMF reserves, known as special drawing rights, to poorer ones.
China, Japan, South Korea, Italy, France, Germany, Saudi Arabia, the Netherlands, Canada, UK and Switzerland have all pledged funds to the new trust, IMF Managing Director Kristalina Georgieva said in April.
Years of red-hot debt accumulation combined with the fallout of the pandemic and war in Ukraine have crimped the finances of dozens of developing nations, raising the specter of a cascade of defaults as $237 billion in foreign bonds are trading at distress levels.
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The IMF created a record $650 billion in reserves for its members last year to mitigate the impact of the coronavirus by releasing special drawing rights to its member states.
Allocations were based on predetermined quotas, which are broadly based on the size of countries’ economies, meaning just $33 billion went to the 54 African nations — as much as France and Italy combined, and less than half of what the US received.
The new trust aims to provide loans for fiscally strained economies to address longer-term structural challenges that pose macroeconomic risks, including climate change and pandemics. It will be available for about three quarters of IMF nations.
In May, African leaders called for a quick decision on a new allocation of SDRs to help the continent and quicker progress on restructuring the debts of highly indebted countries under a G-20 plan.
The African Development Bank is lobbying rich nations to use their rights to SDRs to help it raise funding to support poorer countries, the first such initiative undertaken by a multilateral lender.