IMF Board backs key change to lending-into-official-arrears policy

The International Monetary Fund's Board has backed a key change to give it more freedom to support crisis-hit countries even if debt renegotiations with big creditor governments like China are still ongoing. The proposal is to reform what the IMF calls its Lending Into Official Arrears (LIOA) policy, a framework that determines if and when it can lend to a country that owes money to another IMF-member nation.

The International Monetary Fund's Board has backed a key change to give it more freedom to support crisis-hit countries even if debt renegotiations with big creditor governments like China are still ongoing.

The proposal is to reform what the IMF calls its Lending Into Official Arrears (LIOA) policy, a framework that determines if and when it can lend to a country that owes money to another IMF-member nation. In a statement late on Tuesday the Fund said its Executive Board had endorsed "reforms to promote the IMF's capacity to support countries undertaking debt restructurings".

A key change will be that it will be able to lend to a country where no debt agreement with one or more of its bilateral creditors has been reached if the Fund has been provided with "additional safeguards". Debt crisis veterans have been long been urging a change to the IMF's approach having seen delays in agreements with the likes of China widely blamed for dragging out Zambia, Ethiopia and Sri Lanka's defaults for years.

"Directors supported the addition of a fourth strand under which the Fund shall seek additional safeguards where an adequately representative agreement has not been reached through a representative standing forum," the IMF said.