IMF To Distribute $650b Reserves In New SDRs To Promote Post-pandemic Global Recovery

As per the latest reports on Aug 24th, 2021, it has been announced by the IMF that it is likely to distribute about $650 billion in new Special Drawing Rights (SDR) to its members, facilitating a “crucial boost” in the worldwide efforts to further battle the Covid-19 pandemic, as per Managing Director, Kristalina Georgieva.

This International Monetary Fund's biggest-ever dispersal of monetary reserves will benefit the global economy through an extra liquidity source, enlarging member nations’ foreign exchange reserves and mitigating their dependence on more costly domestic or external debts, as per Georgieva in a statement.

She further added, “The allowance of the monetary reserve is an essential encouragement for the world and, if it is utilized efficiently, it will act as an innovative opportunity to battle this unforeseen emergency.”

On the other hand, the IMF highlighted its interests in diverging patterns in the global economy and explained that this new SDR allocation would enable developed economies to support those adversely hit by the pandemic while boosting the perspective for the global economy. 

Now nations can leverage SDR allocations to improve their economies and initiate steps to battle the Covid-19, but should not utilize the fiscal gap to postpone required financial changes or debt rebuilding, the IMF explained in a separate guidance document.

IMF member nations will get SDRs - the fund’s unit of exchange upheld by dollars, euros, yen, sterling, and yuan - to an extent with their current quota shareholdings in the fund.

Georgieva explained that around $275 billion of the allocation will be used by the developing markets and nations, along with some $21 billion to flow to low-scale nations.

Recommended Read: Global Economy Will Back To Pre-pandemic Level By 2022, Says OECD

Last week, the IMF suspended Afghanistan's admittance to IMF assets, including this SDR support, because of the lack of confirmation over the nation’s legal authority after the Taliban regained control of capital city Kabul.

An absence of clearness among the global community over official government acknowledgment in Venezuela kept Caracas out of the current monetary support.

However calls had been made to restrict Belarusian admittance to SDRs, Alexander Lukashenko's strict legal authority has not been denied by the sufficient IMF members and the fund is permitting access.

Hotspot For Added Support

Georgieva explained the IMF was empowering developed nations such as China etc. to get SDRs to channel them to more unfortunate nations that require them more.

One crucial choice for rich nations to contribute SDRs to the IMF’s current Poverty Reduction and Growth Trust for low-income nations, she explained.

The IMF was additionally proceeding to operate on a possible Resilience and Sustainability Trust that could utilize directed SDRs to assist the weakest nations with underlying change, incorporating managing environmental change, she said.

Another chance, she said, could be to channel SDRs to help lend by multilateral advancement banks.

Recommended Read: Post COVID-19: Global Economy Keeps Showing Positive Recovery Signs, But ‘delta’ Needs Close Observation

The IMF's last SDR circulation came in 2009 when member nations got $250 billion in SDR reserves to support easing the global financial emergency.

To spend their SDRs, nations are required to first exchange them for basic hard currencies, expecting them to track down a desired exchange partner nation.


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