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Lending commitments and disbursements from IFIs

Climate- and security/fragility-related factors, as well as tighter global liquidity conditions are key drivers of higher demand for borrowing from the IMF in 2016.  Several programs are expected to help address financing gaps from drought causing shortfalls in hydropower generation and lower agricultural output, especially in eastern and southern Africa. Many commodity exporters confront sizable fiscal adjustments while others face continued financial market volatility or domestic fragility. Geopolitical tensions, domestic strife, and terrorism are also taking a toll on the outlook in several economies.

The IMF’s new concessional loans, those with interest costs subsidised by donor resources, include a precautionary arrangement for Kenya (SDR 1.1 billion/$1.5 billion) mainly to help the country address potential instability in global markets, and support for Rwanda (SDR 144 million/$196 million), Afghanistan (SDR 32 million/$43.5 million), and Central African Republic (SDR 84 million/$114 million). Based on country desk surveys and pending requests in the pipeline, demand for concessional IMF lending could reach SDR 2.3 billion ($3.1 billion) for 2016, although projections of demand for concessional support are usually subject to high uncertainty.

The IMF is also continuing its efforts to provide more comprehensive and flexible financing to low-income member countries that are eligible for concessional financing from the Poverty Reduction and Growth Trust (PRGT). In October 2016, the IMF approved a modification of the mechanism governing interest rate setting of Poverty Reduction and Growth Trust facilities and set the interest rates to zero on all IMF concessional loans under the PRGT for the next two years through end-December 2018.

In addition, the Review of Eligibility for Concessional Financing (next planned for 2017) will cover the access to concessional financing by the IMF. Work is also underway to assess the adequacy of the IMF’s concessional facilities, with a comprehensive review planned for 2018.