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Debt relief packages for developing countries are aimed at reducing the debt burden that a country cannot manage. The International Monetary Fund (IMF) has taken this initiative to ensure that the country’s short-term needs and emergency needs are addressed.
Lending instruments are adjusted so that the nations will have doubled the resources normally available to them through 2014 (IMF, 2010). Lending at concessions is planned till 2011 and the concessions are to be increased. Steps have been taken to achieve macroeconomic stability. Radical policy changes have been incorporated. Policy changes have integrated the economies with concessional debt relief and led the low-income nations into the global economy (IMF, 2010). The activities noted are that low-income countries are “joining international capital markets, entering markets for goods and services, attracting foreign investment, nurturing their private financial sectors, and benefiting from money sent home by citizens working abroad” (IMF, 2010). Greater exposure indicated more openness and vulnerability causing great differences in food and fuel prices.
Lending windows have been introduced through the Poverty Reduction and Growth Trust which became effective in January 2010: the Extended Credit Facility, the Standby Credit Facility, and the Rapid Credit Facility (IMF, 2010). The Extended Credit Facility provides some flexibility to countries that can pay up within a moderately lengthy payment and also gives them sufficient time to prepare a poverty reduction statement. The Standby Credit Facility assists in short-term financing needs. The Rapid Credit Facility provides a single payment for urgent needs.
Accompanying policy changes help to support poverty alleviation. National budgets were aimed at the poor (IMF, 2010).
Apart from these, the IMF has provided $3.8 billion for concessional lending. IMF special drawing rights allowed the poorer countries to avail themselves of $18 billion. The countries could count the money as extra assets or use it for payments (IMF, 2010).
Multilateral debt relief initiative is another manner of a poor nation escaping. The flexibility of the MDR (multilateral relief) helps the low-income nations tide over their problems in a time-bound manner (IDA and IMF, 2009). Individual country situations have been considered safe. Arrears clearance operations of any nation wishing to be provided more funding for enhancing their performance is possible through multilateral debt relief. A track record for reforms could be built up using the MDR. The factor of judgment to assess progress towards the objectives must be appropriate. Poverty reduction strategies need to be prepared and implemented. Recipient countries have been greatly relieved of their debt burdens by 80% through the initiatives of multi-lateral debt relief.
Debt sustainability of developing countries is being helped by IMF and IDA through the Debt Management Facility (IDA and IMF, 2009). The use of the Debt Sustainability Framework is being promoted. Workshops have been arranged for the low-income countries to promote a better understanding of the DSF to guide them in their borrowing decisions. Efforts of HIPCs helped in increasing the poverty-reducing expenditure. However, the progress made was uneven. Primary education and gender equality changed for the better. Countries which were having difficulties in the political situations and governance were slow to deliver changes in the finance and services aspects. The “nominal GDP was reduced by 7%, exports by 9% and government revenue by 12%” (IDA and IMF, 2009). Countries could be classified into high risk, moderate risk, and low risk. To maintain debt sustainability, close monitoring and tight control of money could raise questions about availability. The HIPC Initiative and the MDRI have both contributed to the progress of low-income nations.
References
IMF (International Monetary Fund), 2010. Web.
IDA and IMF, International Development Association and International Monetary Fund, 2009. Web.
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