What is the IMF's new climate fund and how does it work?

As climate-related disasters increase in number and intensity, low and middle-income countries are particularly at risk.

COVID-19 also exposed the huge risks and costs a pandemic can bring – with the potential to overwhelm government budgets.

To help low and middle-income countries face challenges like these, the International Monetary Fund (IMF) has launched a new fund called the Resilience and Sustainability Facility (RSF).

The RSF is a loan fund to help countries tackle longer-term challenges such as climate change and pandemics.

It aims to provide affordable, longer-term finance and to support government policy reforms.

The facility is part of the IMF’s Resilience and Sustainability Trust, a $50 billion fund to help economies build resilience to external shocks, grow and recover sustainability and strengthen their long-term financial stability.

The RSF is for low-income countries, vulnerable middle-income countries and small states.

The IMF says 75% of its 190 member countries will be eligible.

To qualify for funding, countries need to show they’re making policy reforms to reduce the potential impact of a climate change event or pandemic.

Countries also need to be supported through an IMF support programme and have sustainable debt levels.

Climate change is bringing “significant economic and social costs” as the frequency and scale of disasters rise, with lower-income and smaller countries particularly affected, the IMF says.

Global warming is also driving other trends that are “less visible and disruptive” in the short term, but which carry “large longer-term economic risks”.

The RSF aims to respond to this by helping countries adapt to climate change, mitigate its impact and decarbonize.

COVID-19 showed that the health, economic and social impacts of a pandemic can be “exorbitant”, the IMF adds.

It has estimated that costs from the pandemic could reach almost $14 trillion by 2024.

Preparing now for future pandemics will deliver “immense returns” by reducing the risk of costly events that can dwarf current government budgets, the IMF says.

Rwanda is the first African country to secure funding from the Resilience and Sustainability Facility.

The funding of around $319 million will help the country build climate resilience. Reforms alongside this will include improving the monitoring and reporting of climate-related spending and strengthening disaster-risk reduction and management.

Rwanda has pledged to cut greenhouse gas emissions by 38% by 2030 under its climate action plan.