WASHINGTON, (Reuters):
THE INTERNATIONAL Monetary Fund was considering on Monday a new form of financing to provide quick help to poor countries hit by economic shocks, including sudden rises or falls in commodity prices such as oil.
Up to press time, no results from these deliberations had been made available.
Known as the "exogenous shocks facility," the proposal is being pushed by the Group of Eight industrial countries, which includes the United States, France and Britain. They argue current IMF assistance to poor countries does not provide money quickly enough or cannot provide enough of it.
Until now, only countries that have an IMF-supported loan program can qualify for additional aid when they encounter sudden economic shocks.
Under the proposed facility, poor countries that do not have a standing relationship with the IMF will be eligible for aid.
"Many low-income countries face considerable vulnerability to external shocks and the IMF has long ago identified this as a problem," said Todd Moss, a senior research fellow at the Washington-based Centre for Global Development.
"The general donor response to shocks has been ad hoc and very uneven, so there is scope for a more thorough and predicable approach, with the Fund a logical institution to take a lead role," he said.
IMPORT COSTS
Countries globally have seen import costs for a wide range of commodities soar in recent years. Benchmark U.S. light crude , for example, is trading around US$61 a barrel, up 40 per cent from the end of last year and double 2003 prices.
Under a proposal to be discussed by the IMF's board on Monday, developing countries would be offered quick access to two- to three-year loans, with a lump sum upfront to ward off immediate problems from sudden economic shocks.
The remainder would be paid out in regular instalments while the borrowing country makes the necessary economic adjustments to deal with the shock, the proposal suggests.
