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The International Monetary Fund’s (IMF’s) ‘Poverty Reduction and Growth Trust’ (PRGT) now can only lend money to the poorest countries. Thus it naturally limits the capacity of developing countries with higher income levels to get low or zero interest loans from the IMF.

Kristalina Georgieva, Managing Director, IMF is concerned about tourism dependent and other middle income countries that had weaker fundamentals and high debt levels. These countries were in poor stages even before the Covid-19 pandemic. So, this seeks a broader definition of what makes a country ‘vulnerable’ to get IMF’s loans. She commented, “The international community should look into other factors for vulnerability, as we think of appropriate ways to support developing countries.” She also thinks that the notion of ‘vulnerability’ should go beyond the simple idea of income levels and it can include climate shocks.

Georgieva is eager to discuss with IMF members regarding if they should give back-up to the pandemic affected middle income countries with low and no interest financing, instead of just the poorest countries.

G20 finance officials have backed $650 billion expansion of IMF’s emergency reserves that is - ‘Special Drawing Rights’ (SDR). With this, even richer IMF members will be able to loan to the IMF’s PRGT for helping the poorest countries. Georgieva commented that it was a ‘realistic’ step.

So, IMF members can lend excess SDRs to the IMF’s PRGT facility. But any formal IMF mechanism is absent to facilitate loans to help middle-income countries. This issue has been raised during the G20 meeting. Concerning this matter, the meeting noted a call by Mexico and Argentina ‘for greater debt relief for middle income countries’.

The EU thinks that the middle income countries should be covered by the G20 Common Framework. Valdis Dombrovskis, Vice President, European Commission in a statement said the framework should become the “standard process for all debt restructuring cases, including in middle-income countries.” Georgieva said that there were also other ways to support middle income countries.