The Board of Governors of the International Monetary Fund (IMF) approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion (about SDR 456 billion) on Monday to boost global liquidity.
A press statement issued by the IMF from Washington in this regard also said that the general allocation of SDRs will become effective on August 23, 2021.
“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,” said IMF Managing Director Kristalina Georgieva.
“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,” she added. “It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis,”
Earlier on July 8, 2021, the Executive Board adopted a decision that concurred with the Managing Director’s proposal for a new general SDR allocation equivalent of US$650 billion.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. So far SDR 204.2 billion (equivalent to about US$293 billion) have been allocated to members, including SDR 182.6 billion allocated in 2009 in the wake of the global financial crisis.
The value of the SDR is based on a basket of five currencies — the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
The newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund, according to the statement.
About US$275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.
Currently, Bangladesh has SDR 889.85 million as outstanding purchases and loans. The country’s SDR is 693.43 million and it has quota of SDR 1066.6 million
“We will also continue to engage actively with our membership to identify viable options for voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth”, Ms. Georgieva continued.
The press statement also mentioned that one key option is for members that have 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 IMF is also exploring other options to help poorer and more vulnerable countries in their recovery efforts. A new Resilience and Sustainability Trust could be considered to facilitate more resilient and sustainable growth in the medium term, according to the statement.