According to managing director Kristalina Georgieva, this is “a powerful vaccine to support the world’s financial health”
As of today, the largest distribution of special drawing rights in history, worth approximately $ 650 billion, comes into force, the International Monetary Fund said.
According to managing director Kristalina Georgieva, the distribution is “a powerful vaccine to support the world’s financial health, which, if used wisely, will be a unique opportunity to combat this unprecedented crisis.”
Kristalina Georgieva called today’s act “the largest distribution of special drawing rights in history”.
“The allocation of SDRs will provide additional liquidity to the global economic system by supplementing countries’ foreign exchange reserves and reducing their dependence on more expensive domestic or external debt. Countries can use the space provided by SDR allocations to support their economies and intensify their fight against the crisis.
SDRs are distributed among countries in proportion to their IMF quota shares. This means that about $ 275 billion will be allocated to emerging and developing countries, from which low-income countries will receive about $ 21 billion, which in some cases equates to 6% of GDP.
SDRs are a valuable resource and solution how to use them optimally is taken by each of our member states. In order for SDRs to be used to the maximum benefit of Member States and the world economy, these decisions must be reasonable and well-founded.
To support countries and help ensure transparency and accountability, the IMF provides a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and management, and assessing the ways in which it may affect debt sustainability. The IMF will also provide up-to-date information on all SDR stocks, transactions and trading – including a follow-up report on the use of SDRs in two years.
To increase the benefits of this allocation, the IMF encourages the voluntary referral of part of the SDRs from countries with strong external positions to the most deprived countries. Over the past 16 months, some members have already pledged $ 24 billion, including $ 15 billion of their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust Fund, which lends on preferential terms to low-income countries. incomes. This is just the beginning and the IMF will continue to work with our members to build on these efforts.
The IMF is also discussing with its member states the possibility of creating a new trust fund for sustainability and stability, which could use distributed SDRs to help the most vulnerable countries in structural transformation, including in tackling climate challenges. Another option could be to target SDRs in support of lending by multilateral development banks.
“The allocation of SDRs is an important component of the IMF ‘s broader efforts to assisting countries in combating the pandemicwhich include: $ 117 billion in new funding for 85 countries; debt relief for 29 low-income countries; as well as policy advice and capacity development support to more than 175 countries to ensure a stronger and more sustainable recovery, “Georgieva said.
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