The International Monetary Fund (IMF) is boosting its reserves by some US$650 billion, to help pandemic-hit countries deal with immediate external financing pressures.
The Fund will help emerging, and frontier economies deal with the short-term impact of COVID-19, but it will not guarantee a healthy debt-servicing outlook, said Fitch Ratings.
IMF Relief Package
G7 advanced economies struck a deal after discussing this proposal to boost IMF reserves for pandemic relief. The G7 meeting addressed the subject of help for low-income countries.
Japan’s Kyodo news agency confirmed that the G7 had reached an agreement to push up IMF reserves by close to US$ 650 Billion through a fresh allocation of its special drawing rights.
These reserves will be used to finance a relief package for emerging economies worst hit by pandemic effects.
The added reserves would, however, not significantly improve countries’ credit ratings, warned Fitch.
This February, a Morgan Stanley analysis of the Fund’s data showed Venezuela would be the largest benefactor of a new allocation in terms of percentage of gross domestic product, followed by Zambia, Suriname and Bahrain.
In terms of a boost to reserves, a Citi analysis in February showed the most significant percentage increase by far would be for Zimbabwe, followed by Chad, Zambia and Ecuador.