Distribution of IMF’s $ 650 billion reserves ‘pulled tight’ for global economy – Georgieva
WASHINGTON, Aug.23 (Reuters) – 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, said the general manager Kristalina Georgieva mentioned.
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.
The IMF underscored concerns about divergent trends in the global economy and said the new SDR allocation would allow richer countries to help those hard hit by the pandemic, while improving the outlook for the global economy. .
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.
IMF member countries will receive SDRs – the fund’s unit of exchange backed by dollars, euros, yen, pounds sterling 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.
The Fund last week suspended Afghanistan’s access to IMF resources, including this SDR allocation, due to a lack of clarity on the country’s government after the Taliban took control of Kabul. Read more
A lack of clarity within the international community on the official recognition of the Venezuelan government has prevented Caracas from benefiting from the current allocation.
Although calls have been made to limit Belarusian access to SDRs, the hardline government of Alexander Lukashenko has not been disowned by enough IMF members and the Fund is allowing access.
SOURCE OF ADDITIONAL SUPPORT
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.
Reporting by Andrea Shalal in Washington, additional reporting by Rodrigo Campos in New York; Editing by Sam Holmes and David Gregorio
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