Distribution of reserves of 650 billion dollars is “injected” for the world economy, according to the IMF
23 Aug 2021 20:43:58
The IMF will distribute around $ 650 billion in new special drawing rights to its members on Monday, providing a “significant boost” to global efforts to fight the COVID-19 pandemic, Managing Director Kristalina Georgieva said.
The larger distribution of currency reserves from the International Monetary Fund will provide additional liquidity to the global economy, supplementing member countries’ foreign exchange reserves and reducing their dependence on more expensive domestic or foreign debt, Georgieva said in a press release.
“The allowance is a huge boost for the world and, if used wisely, a unique opportunity to tackle this unprecedented crisis,” she said.
Countries can use the SDR allocation to support their economies and step up their fight against the coronavirus crisis, but should not use the fiscal space to delay needed economic reforms or debt restructuring, the IMF said in a separate guidance document.
According to Reuters, IMF member countries will receive SDRs – the fund’s unit of exchange backed by dollars, euros, yen, pounds and yuan – in proportion to their existing quotas in the fund.
Georgieva said about $ 275 billion of the allocation will go to emerging markets and developing countries, with some $ 21 billion going to low-income countries.
Georgieva said the IMF encourages rich countries that receive SDRs to channel them to poorer countries that need them more.
A key option is for richer countries to contribute SDRs to the IMF’s Poverty Reduction and Growth Trust Fund for Low Income Countries, she said.
The IMF was also continuing to work on a possible Resilience and Sustainability Trust that could use channeled SDRs to help the most vulnerable countries transform structurally, including on climate change, she said.
Another possibility, she said, could be to channel SDRs to support lending from multilateral development banks.
The IMF’s last SDR distribution was in 2009, when member countries received $ 250 billion in SDR reserves to help ease the global financial crisis.
To spend their SDRs, countries would first need to exchange them for underlying hard currencies, forcing them to find a willing exchange partner country.