The Board of Governors of the International Monetary Fund (IMF) on Tuesday approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion (about SDR 456 billion) to boost global liquidity.
“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.
“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy.
“It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis,” IMF Managing Director Kristalina Georgieva said.
A statement from the Fund explained that the general allocation of SDRs will become effective on August 23, 2021.
It added that the newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund.
About US$275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.
Georgieva said, “we will also continue to engage actively with our membership to identify viable options for voluntary channelling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth.”
Developing countries including Nigeria have appealed that a larger proportion of the much-awaited new SDR is allocated to them but one key option is now for members with strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT).
Concessional support through the PRGT is currently interest-free.
The statement added that IMF was also exploring other options to help poorer and more vulnerable countries in their recovery efforts.
One of such options is a new Resilience and Sustainability Trust to facilitate more resilient and sustainable growth in the medium term.
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