The International Monetary Fund has made available today ~USD650 billion in Special Drawing Rights, known as SDRs, the multilateral lender announced via an official statement.
“The allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis, ” said Kristalina Georgieva, Managing Director of the Washington-based entity.
“SDRs are being distributed to countries in proportion to their quota shares in the IMF. This means about US$275 billion is going to emerging and developing countries, of which low-income countries will receive about US$21 billion – equivalent to as much as 6 percent of GDP in some cases,” Georgieva said.
The decision is part of an effort by financial organizations around the world to inject additional liquidity into the global monetary system, “supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt,” Georgieva said. “Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis,” she added.
On August 2, the Board of Governors of the IMF approved the allocation of about SDR 456 billion, equivalent to ~US$650 billion, to boost global liquidity. Georgieva added that this “allocation is a critical component of the IMF’s broader effort to support countries through the pandemic, which includes: US$117 billion in new financing for 85 countries; debt service relief for 29 low-income countries; and policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery.”
The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries. According to the IMF, the SDR is comprised of a basket of international currencies: the U.S. dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound.
With today’s announcement the Fund has allocated a total of SDR660.7 billion, the equivalent to about USD935.7 billion, including four general allocations and a one-time special allocation. The first allocation, for SDR 9.3 billion, was made in yearly installments in 1970-1972.
According to the website, the IMF is an organization of 189 countries “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
Read the official statement.