IMF trust: Federal Council adopts dispatch on loan guarantee to SNB to reduce poverty

Bern, 30.09.2016 - During its meeting today, the Federal Council transmitted the dispatch on a guarantee of an SDR 500 million (approximately CHF 690 million) loan from the Swiss National Bank (SNB) to the International Monetary Fund's Poverty Reduction and Growth Trust (PRGT). The IMF grants concessional loans to its lowest-income member countries through the PRGT with a view to facilitating structural adjustments and paving the way for sustainable economic growth in these countries.

To continue to ensure the IMF's lending capacity for poorer countries after 2016, it has asked Switzerland to make another contribution to increase the PRGT loan account. The last time it was asked to make such a contribution was in 2011. The additional funding requirement is explained by the fact that the IMF increased the access of poorer countries to concessional resources in July 2015, and the current commitments are already above the trust's envisaged average annual lending capacity. Finally, the IMF anticipates a rise in funding needs due to the uncertain global economic situation.

The Monetary Assistance Act (MAA) makes provision for Switzerland to be able to make contributions in favour of low-income countries through the IMF. The Federal Council can submit a request to the SNB to take on loans granted with a federal guarantee. To provide the guarantee, the Federal Council submits a dispatch to Parliament for a guarantee credit amounting to CHF 800 million. This amount contains a buffer for exchange rate fluctuations. The IMF's loan programmes are an effective tool to strengthen the macroeconomic framework in developing countries. The IMF currently grants repayable loans via the PRGT within the framework of programmes in approximately 20 poorer countries.

Switzerland has been participating in the IMF's facilities for developing countries since 1988. As an open economy with an important financial centre and its own currency, it is in Switzerland's interest to help ensure a global monetary and financial system that is as integrated and developed as possible. By providing monetary assistance, Switzerland also protects its standing in the international financial system and can present its position on financial stability issues in a convincing and effective way in international bodies.

Address for enquiries

Beat Werder, Head of Communications, State Secretariat for International Financial Matters SIF
Tel. +41 58 469 79 47, beat.werder@sif.admin.ch