IMF begins zero interest lending for low income countries

Mobilises $344b for lending, as inequality gap persists

The International Monetary Fund (IMF) has commenced a zero interest rate on all of its concessional facilities granted to member countries until 2018.

The move, mainly targeted at assessed low-income countries, including Nigeria, would also be extended further if the global interest rate conditions remain low.

It would be recalled that low-income countries are passing through financial crunch, some advanced countries are facing surfeit, causing a negative interest rate on savings in those countries.

IMF Managing Director, Christine Lagarde, who made the disclosure yesterday at the ongoing yearly meetings of IMF/World Bank in Washington DC, said the new direction will help low income countries to absolve the global growth shocks.

She said it would also help the countries avoid going to the international markets or relying heavily on bilateral loans that is presently costly, to raise money for various development projects in their respective countries.

Meanwhile, 26-member countries of IMF have so far pledged $344 billion in pursuit of plans to increase the institutions overall lending capacity to $1 trillion, through the provision of more bilateral facilities.

The disbursement modalities for the new lending plans unveiled, according the IMF chief, would be detailed before the end of the event.

Meanwhile, the World Bank President, Jim Yong Kim, has affirmed that there are increasing numbers of developing countries now sliding into recession since 2009.

He however said the global institution has been working to meet the rising demands for assistance to the affected countries to manage global challenges.

He lamented that multiple risks are now threatening the hard-fought gains in many countries and can hamper progress on the goals of ending extreme poverty by 2030, and boosting shared prosperity.

“Our research shows that inequality is still far too high, both globally and within countries, constraining growth and breeding instability. We need to focus on growth and continue to reduce inequality – and we have to make growth more equitable, and more sustainable.

“Because of the multiple, overlapping global shocks including climate change, forced displacement, and pandemics – we have to scale up our efforts dramatically.

“If we are going to end extreme poverty by 2030, we have got to continue to focus our efforts, and we have to face each global challenge with an urgency and scale commensurate to the problem,” he said.

Listing strategies to fight the growth challenge, he said there is need to accelerate inclusive and sustainable economic growth; investing in human capital, so countries can compete in the global economy; and collectively help to foster greater resilience to global shocks and threats.

“We believe that with strong, consistent, comprehensive and coordinated action, countries can actually lift that growth, which needs to be more inclusive.

“Our hope is that at the end of the annual meetings, each finance minister, central bank governor will go back home and think of what can
be done to propel that growth, which is currently too low for too long and benefitting too few.

“When demand is lacking and monetary policy is overstretched, fiscal policy should step up. This will help put in place structural reforms that are much-needed, which have been started in some places, but seriously lacking as bold policies,” she said.

Lagarde pointed out that the prospects for low income economies may be more challenging with varied outlook and as such, need support now.