IMF approves new food shock financing window to ease war shortages02 October 2022
Reuters, Washington :
The International Monetary Fund said its executive board approved a new mechanism for low-condition emergency loans to help vulnerable countries cope with food shortages and rising costs stemming from Russia's war in Ukraine.
The IMF said its new Food Shock Window will be open for one year through its existing Rapid Credit Facility and Rapid Financing Instrument programs for countries with urgent balance of payment needs that "are suffering from acute food insecurity, a sharp food imports shock, or from a cereals export shock."
The IMF's announcement did not mention any specific countries that would be eligible for low-condition emergency loans under the new window.
Two people familiar with the new mechanism said it would allow countries to borrow up to half of their quota, or shareholding, in the fund -- similar to the emergency Rapid Financing Instrument and Rapid Credit Facility, which were used to rush billions of dollars worth of financial assistance to IMF member countries struggling with the COVID-19 pandemic.
Among eligibility criteria, countries would have to show that the food import price shocks are creating a negative balance of payments impact of 0.3% of GDP. New IMF research identifies at least 48 countries in this category, including many of the world's poorest, most vulnerable and conflict-affected states.
Negative cereals export shocks would have to reach 0.8% of GDP for eligibility, and borrowers with unsustainable debt would be denied -- a rule that would cause difficulties for countries such as Lebanon or Sri Lanka..