The International Monetary Fund (IMF) has projected that its financial assistance to low-income countries, most of which are in Africa, could hit $48 billion covering the current COVID-19 pandemic and its immediate aftermath.
In a release on its efforts to help low-income countries hard-hit by the pandemic, the Bretton Woods institution said that the large financing needs of poor countries are only likely to grow as they deal with the crisis and its economic impacts.
The fund noted that while providing stronger safeguards against taking on debt they cannot handle, for these efforts to aimed at assisting poorer countries to succeed, economically stronger member countries will have to play their part.
It stated that the pandemic has dealt a severe blow to the economies of many low-income countries which has led to output growth stoppage or reversal, living standards decline, poverty increase, warning that a decade of solid progress is now threatened.
The IMF report stressed that financial assistance to 50 low-income countries reached $13 billion in 2020 compared to an average of $2 billion a year pre-pandemic: a more than six-fold increase while $739 million in grant-based debt service relief was granted to 29 of its poorest and most vulnerable members.
However, a report by Transparency International (TI), which tracks these funds in several countries, has said that the $3.4 billion which Nigeria received last year in emergency financial assistance from the IMF to support its COVID-19 has been less than transparently spent.
Added to that, the TI said Nigeria’s federal government announced a 2.3 trillion Naira (US$6 billion) stimulus, but noted that a review identified several factors that weakened the effective implementation of commitments.
According to the TI report, some of the challenges to openness in the government spending of the loans, as well as the stimulus package by the federal government, were that relevant information was either hidden, hard to find, or inaccessible.
It noted that tracking published information was difficult, whereas beneficial ownership information was inadequate.
“In almost all cases, there was not sufficient identifying information about beneficial owners to ensure that people were not illicitly profiting from government contracts. Moreover, governments did not specify how they would provide the information they committed to disclosing,” the TI report stressed.
The report which covered Nigeria, Cameroon, Ecuador, and Egypt, noted that according to official figures, many of Nigeria’s poorest citizens have yet to see the benefit of the assistance.
“Against these difficult conditions, civil society groups have highlighted how crucial it is to keep governance safeguards from slipping through the cracks, leaving life-saving resources at risk of theft or malfeasance,” the transparency initiative stated.
It added: “In October 2020, the government announced it would release a first interim audit report of its COVID-19 spending. This report was never released to the public, despite an official from the Auditor-general’s office indicating the report was already submitted to the National Assembly in September 2020. An interim report was produced by 15 January 2021; however, this report does not appear to be publicly available.”
But in its report, IMF stated that looking ahead, low-income countries will continue to require exceptional levels of external financial support as they recover from the pandemic, and boost investment to build more resilient and inclusive economies.
Against this backdrop, the IMF said that it has approved a package of far-reaching reforms to the Poverty Reduction and Growth Trust (PRGT) to allow it to better respond to the financing needs of low-income countries over the next few years.
“With a challenging road to recovery ahead, we project that demand for IMF support will remain elevated. Total IMF lending to low-income countries is projected to reach around $48 billion during the pandemic and its immediate aftermath. PRGT credit outstanding could peak at $32 billion in 2025-26.
“However, there are significant uncertainties around the timing and strength of the economic recovery, and the possible demand for fund concessional support.
“But IMF loans will only meet a fraction of the external financing needs of low-income countries. Bilateral donors and multilateral development agencies must also step up to play their part, both through bilateral aid, and support for the IMF’s fund-raising efforts,” the fund noted.
Alongside the greater access to financing, the IMF said it has also approved a two-stage funding strategy to cover the cost of pandemic-related lending and ensure the financial sustainability of its concessional support.
“In the first stage, the fund aims to mobilise a further $18 billion in PRGT loan resources and $3.3 billion in new bilateral contributions for subsidy resources to allow continued lending through the PRGT at zero interest rates,” it added.
In the second stage of the strategy, in 2024/25, by which time current economic uncertainties are expected to have receded, the IMF said it will decide on the size of the poverty reduction financing and associated funding mechanisms for the long term.
In the second quarter of last year, the IMF announced that it had approved $3.4 billion in emergency financial assistance under the Rapid Financing Instrument (RFI) to support the Nigerian authorities’ efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices.