Managing Director, International Monetary Fund, IMF, Ms Christine Lagarde yesterday said that the board of the multilateral institution has approved a zero interest loan facility for concessionary loans for member countries facing financial challenges.
She said “That is really important for low-income countries to be able to actually absorb the shocks without necessarily going to the international markets or relying on bilateral lending capacity of close to a trillion dollars by extending access to bilateral borrowing agreements. The new agreements that are being signed this week will run at least through the end of 2019, and will continue to serve as a third line of defence.
“As you know the first line of defence is quota, second line is New arrangements to borrow, and the third line of defence will be those bilateral loans. We have so far received pledges of $344 billion from 26 members. We look forward to others joining this effort. We will provide more detail shortly, and there will be some signing sessions organised in the course of the next two days Lagarde said.
IMF conditions
This ordinarily would be cheering news for Nigeria but the facility is bugged with conditionality that top government sources say Nigeria will not be willing to subject its citizens to at this time.
A top government sources said in Washington that the IMF will be pressing for further devaluation of the Naira and fuel price hike which the government may not be willing to accept as a result of the social implication of further devaluation and another hike in fuel prices.
Lagarde at a press briefing yesterday said “the outlook for advanced economies remains subdued and the outlook for developing economies provide some guarded optimism with great diversities within the various economies. Prospects for low income economies may be more challenging with varied outlook. We see growth as too low, too long and benefiting few.
“We believe that there are more policies that meet the eyes. By exploiting synergies in policies we can overcome these challenges. We also believe that each country has something to offer. My hope us that at the end of these meetings, each finance minister, each Governor of central bank will go back home thinking of what to fuel growth.
Monetary , Fiscal policies
For example, when monetary policy has been over stretched, fiscal policy can step up. “This will also put in place the structural reforms that are much needed, which have been sorted out in some countries, but which are still lacking in other places. So, what does it mean for the IMF?
It means that if we want to improve the inequality issue, we must have a strong international safety net. In this context, I am pleased to reveal that our board recently approved the extension of zero interest rate on all concessional facilities from 2016 to 2018, and thereafter, if there is need for extension.”
IMF had earlier said “we find ourselves in a low-growth, low-rate, era characterized by increased political and policy uncertainty. This is creating many challenges for banks, policymakers, and corporates, in all parts of the world. Failure to adapt to this new era could undermine the health of financial institutions and add to the pressures of financial and economic stagnation.
