The IMF’s concessional lending policy: situation and outlook

The International Monetary Fund (IMF, or the Fund) has been uninterruptedly providing concessional financing to low-income countries since 1976. This financing has been channelled practically in its entirety under the same financial instrument, namely a voluntary participation trust fund that is separate from IMF finances, but managed by the latter. The programmes financed with these resources have progressively focused on macroeconomic stabilisation, the signalling of reforms and attracting other aid, as part of a poverty-reduction strategy that should be led by the borrower country. In 2009, the IMF overhauled its concessional financing policy: it incorporated new credit facilities, with a similar design to that of its ordinary facilities; it boosted the blending of concessional and ordinary resources for those countries with access to both types of financing; and it staggered the cost of the financing against a background of very low interest rates. Throughout 2018, the IMF will again review the concessional financing toolkit available to low-income countries, based on the experience built up in recent years. This article provides a framework for assessing the ongoing review.