From May 1, low income and vulnerable middle-income countries including Nigeria can borrow from the new $45 billion Resilience and Sustainability Trust by the International Monetary Fund (IMF) to support them on climate change and others.
The RST is the third pillar of the IMF’s lending toolkit, coming after the General Resources Account and the Poverty Reduction and Growth Trust from which the countries in the bracket can draw fund.
It will provide policy support and affordable longer maturity financing – with a 20-year maturity and a 10½ -year grace period – to help build resilience against long-term risks to balance payments stability.
The Find Managing Director, Kristalina Georgieva announced the new Trust that was approved on Wednesday by the Board in a post titled, “Fast-Moving FinTech Poses Challenge for Regulators”.
The new trust was hammered out by IMF staff after the Group of 20 major economies backed the creation of the instrument in October.
“As the world is confronting consecutive global shocks, we must not lose sight of the critical actions needed today to ensure longer-term resilience and sustainability — and we can only succeed by working together.
The RST will build on the impact of the $650bn SDR allocation implemented last year by channelling resources from economically stronger members to countries where the needs are greatest. The aspiration is to build a Trust of at least $45bn in resources.
About three-quarters of the IMF’s country members will be eligible for RST financing, including low-income members as well as most middle-income countries and all small developing states. We have worked extensively with our members and other stakeholders to design the RST, to balance the needs of potential contributors and borrowers.”
The IMF disclosed this in a blog post titled, “Fast-Moving FinTech Poses Challenge for Regulators”.
According to the body, even though crypto does not have a central intermediary, it has grown rapidly within the last two years.
“Another technological innovation, which has grown rapidly in the past two years, is decentralised finance, a crypto-based financial network without a central intermediary. Also known as Devi, it offers the potential of delivering more innovative, inclusive, and transparent financial services thanks to greater efficiency and accessibility.”
“However, Defi also involves the buildup of leverage and is particularly vulnerable to market, liquidity, and cyber risks. Cyberattacks, which can be severe for traditional banks, are often lethal for these platforms, stealing financial assets and undermining user trust. The lack of deposit insurance in Defi adds to the perception of all deposits being at risk. Historically, large customer withdrawals often follow news of cyber attacks on providers.”
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