Mobilizing Innovative Sources Of Finance: Lessons From The Resilience And Sustainability Trust (rst)

In April 2022, the International Monetary Fund (IMF) established the Resilience and Sustainability Trust (RST), its first new lending facility to provide longer-term concessional financing to low- and middle-income countries in order to help them tackle key structural challenges such as climate change and pandemic preparedness. The RST is resourced through voluntary rechanneling by G20 countries as part of their 2021 historic allocation of Special Drawing Rights (SDRs).Costa Rica, Barbados, Rwanda, Bangladesh, and Jamaica were the first five countries to access the Resilience and Sustainability Fund (RSF), the instrument under which RST loans are made. RSF programs have been in demand, with the number of RSF programs reaching 18 by the end of March 2024. As the IMF has concluded an interim review of the RST and intends to undertake a more comprehensive review in 2026, the G20 has an opportunity to provide policy direction to the Fund to make the RST an important, transformational part of the global financial architecture. This policy brief makes three specific recommendations on the Resilience and Sustainability Facility to the G20. First, the G20 should call on the IMF to: (i) remove the qualifying requirement that countries must have a concurrent Fund program in place to access RST concessional funding.; (i1) programmatically have the RSF play a much stronger catalytic role in mobilizing private finance support by focusing on a few ambitious, high-depth reforms; and (iii) deploy RSF resources to help create fiscal space for climate action through debt relief solutions that are timely, fair and effective. Given the demand and pace of existing commitments, G20 members should commit more resources to the RSF. In addition to these RSF reforms, the G20 should also help countries address liquidity challenges by issuing a new round of SDRs, encourage the IMF to fully integrate climate investment needs and shocks into its debt sustainability assessment methodologies, and commit to increasing the supply of concessional finance to enable countries scale up investments for climate-positive development.