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Wednesday, March 22, 2023

The IMF increased the debt limits of member countries

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The directory of International Monetary Fund (IMF) agreed to increase temporarily the annual and cumulative limits of financing by the member countries.

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The changes seek “better assist Fund members in a particularly challenging and uncertain economic time”the Washington-based institution said in a statement.

Both the ‘stand-by’ agreements and the Extended Service programs (SAF) offered by the Fund have a limit on the amount lent from 145% per year of the member country fee and 435% over the program period, net of scheduled reimbursements.

Last night’s decision raised that limit to 200% and 600%, respectively.

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Countries can continue to request credits above these limits “in exceptional circumstances”provided they meet a set of criteria.

The changes arranged by the IMF are aimed especially at emerging markets and developing countries facing “increased financial pressures and vulnerabilities”, to prevent them from falling within the framework of exceptional credits, for amounts higher than these limits.

Although this increase will continue for the next 12 months, the Fund stated that its staff may propose an extension to the board of directors before the end of that period.

This is not the first increase in the financing ceiling decided by the IMF: between mid-2020 and the end of 2021, during the coronavirus pandemic, the agency temporarily raised the annual limit from 145% to 245% of each country’s quotas.

Despite these changes, the body It continues to maintain the same framework with respect to the surcharges of the Special Drawing Rights (DEG), which rises to 200 basis points if it is a credit greater than 187.5% of the country’s quota in the Fund, and to 300 if these the latter last for 51 months.

Source: Ambito

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