The International Monetary Fund’s Resilience and Sustainability Trust

Context

The International Monetary Fund’s (IMF) mandate includes promoting global macroeconomic and financial stability, fostering economic growth, and providing short- and medium-term loans to countries facing difficulties with balance of payments or challenges in meeting their international debt repayment obligations.¹ As a part of this mandate, the IMF’s Resilience and Sustainability Trust (RST) helps low-income and vulnerable middle-income countries strengthen their resilience against external shocks, thus supporting their balance of payments stability over the longer term and enabling them to pursue sustainable growth. The RST, operationalised in 2022, specifically provides affordable long-term financing for countries to overcome structural challenges such as pandemic readiness and climate change. 

How is the RST funded?

The RST is a loan-based trust, with the Resilience and Sustainability Facility (RSF) serving as its lending arm. On the liabilities side, the RSF is funded through voluntary contributions of special drawing rights (SDRs) from IMF member countries with strong external positions. These resources are then used to extend loans to eligible countries in need of support. SDRs are supplementary international reserve assets, whose value is based on a basket of five currencies – the US dollar, the UK pound, the euro, the Chinese renminbi, and the Japanese yen. SDRs are not currency, but holders may exchange them for currency when needed.²

By sourcing funding from voluntary contributions made by member countries with strong external positions, the Trust’s design enables the IMF to strengthen its lending support for vulnerable economies without tapping into the Fund’s general resources.³

Key features of the RST

• Eligibility criteria and access conditionalities⁴

Nations that are eligible to avail of financing from the RST include:

1. all IMF member countries that fall in the category of ‘small states’ (population under 1.5 million) with a per capita gross national income (GNI) less than 25 times the 2021 International Development Association (IDA) operational cut-off,⁵
2. low-income countries eligible for assistance from the Poverty Reduction and Growth Trust (PRGT),⁶ and
3. middle-income countries with a per capita GNI less than 10 times the 2021 IDA operational cut-off.

As such, approximately 75 per cent of the IMF’s member states are eligible to access funds from the RST.

Eligible member states that apply for access to the RSF are required to demonstrate sustainable debt levels and an adequate repayment capacity. In addition, they are required to implement suitable high-quality policy reforms to address long-term structural challenges and build resilience. These structural changes are required to be undertaken concurrently with an IMF-supported programme with upper credit tranche quality policies (UCT program). Disbursements by the RSF are linked to the implementation of the reform measures.

• Terms of finance

Figure 1: Terms of finance under the IMF’s Resilience and Sustainability Facility

Source: CEEW-GFC analysis based on the IMF’s factsheet on the Resilience and Sustainability Facility (RSF)

Disbursal of funds from the RST

The RST set a fundraising target of SDR 33 billion (approximately USD 45 billion) in its first round and had successfully received SDR 31.9 billion in pledges from 21 member countries by March 2024.⁷ By June 2023, the IMF had also expressed the ambition to expand the RST to USD 60 billion, given the sustained demand.⁸

In its initial phase, the RST has also emphasised addressing climate change in developing and vulnerable states through its steady disbursements – and has achieved a provision of approximately SDR 9 billion (or USD 12 billion) in concessional finance to 21 countries through the RSF.⁹ The accessing countries have utilised these funds to catalyse private climate finance, mainstream climate considerations in policymaking, and finance diverse projects covering climate mitigation, climate adaption, disaster management, and resilient infrastructure development.¹⁰

Table 1: Approved funding arrangements under the RST

Source: CEEW-GFC compilation based on IMF press releases on approved RST arrangements with countries

Who should care?

• Low income- and vulnerable middle-income countries
• Multilateral Development Banks (MDBs) (which collaborate with the IMF on the formulation and evaluation of reform measures and packages under RSF arrangements)¹¹