Caribbean Community (CARICOM) countries stand to benefit from a newly approved set of reforms by the International Monetary Fund (IMF) that could enhance concessional lending to low-income nations. The IMF’s decision, announced on Monday, aims to preserve the financial institution’s ability to provide long-term support to low-income countries (LICs) while addressing global economic challenges.
Caribbean nations have previously voiced concerns over the criteria for accessing concessional financial assistance. They have advocated for policies that would extend credit to countries that have already invested in green technologies, reflecting their ongoing efforts toward sustainable development.
Ready to Invest in Barbados? Find the right lender for your real estate investment with NVEST’s Preferred Lenders List.
The reforms come as part of the IMF’s “2024 Review of the Poverty Reduction and Growth Trust (PRGT) Facilities and Financing—Reform Proposals,” which seeks to address the institution’s growing financial commitments. Since the onset of the COVID-19 pandemic, the IMF has significantly scaled up its support for low-income members, with annual lending commitments rising to an average of SDR 5.5 billion (approximately US$7.3 billion) since 2020, compared to SDR 1.2 billion in the previous decade.
The IMF reported that outstanding PRGT credit has tripled since the pandemic, while funding costs at the SDR interest rate have sharply increased. This has created a pressing funding shortfall, which, without reform, could reduce the PRGT’s lending capacity to about one billion SDR annually by 2027, far below projected demand.
To ensure continued support for LICs, the IMF’s Executive Board approved a long-term lending envelope of SDR 2.7 billion (US$3.6 billion) per year. This package includes policy reforms and resource mobilization strategies aimed at sustaining the lending capacity of the PRGT, doubling its pre-pandemic capacity. The reforms will allow the IMF to maintain its critical balance-of-payment support for LICs, while encouraging sound economic policies and attracting additional financing from external sources.
View Commercial Properties for Sale in Barbados
The reforms also introduce a new tiered interest rate mechanism to better allocate concessional resources, ensuring that the poorest LICs continue to benefit from interest-free lending. In contrast, wealthier LICs will be charged a modest, concessional interest rate. This approach reflects the diverse economic circumstances within LICs and allows for more targeted support.
Access to IMF resources will be set at 145 percent of a country’s quota, anchoring the size of future arrangements and overall lending volumes. Additionally, the annual and cumulative limits for PRGT access will remain at 200 and 600 percent of the quota, respectively, ensuring flexibility in the Fund’s support to countries with varying needs. The IMF will also strengthen its risk management framework to account for increased lending volumes and associated risks.
View Commercial Properties for Sale in Barbados
The IMF directors also reached a consensus on using internal IMF resources to support the PRGT’s subsidy requirements. The plan is expected to generate SDR 5.9 billion (around US$8 billion) by 2025, through the distribution of General Resources Account (GRA) net income and reserves over the next five years. This would complement existing bilateral contributions and other savings mechanisms.
The IMF confirmed that the next general review of its facilities for LICs will occur within the standard five-year review cycle, ensuring that the framework remains responsive to future economic developments.
View all of our Properties for Sale in Barbados
