IMF CHIEF BACKS $650BLN ALLOCATION FOR GLOBAL RECOVERY

Wed 24 March 2021:

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said in a statement that she supports discussions about a possible new Special Drawing Rights allocation of $650 billion to support the global recovery from the novel coronavirus pandemic.

“I intend to present by June a formal proposal to the Executive board to consider a new allocation of US$650 billion, based on an assessment of IMF member countries’ long-term global reserve needs, and consistent with the Articles of Agreement and the IMF’s mandate,” Georgieva said on Tuesday.

Georgieva said a new allocation of Special Drawing Rights, the IMF’s own currency, would give member countries – many of which have been hit hard by the COVID-19 pandemic – a big liquidity boost without increasing their debt burdens.

It would also free up resources for member countries to help fight the coronavirus pandemic, support vaccination programs and other urgent measures, she said in a statement.

A new SDR allocation would be the IMF’s first since a $250 billion allocation approved in 2009, during the global financial crisis. Georgieva said IMF staff would develop new measures to enhance transparency and accountability in the use of SDRs, and explore options for richer members to reallocate SDRs to support vulnerable and low-income countries.

If approved, the additional reserves – which can be turned into hard currencies by members or shared with needier countries – should be available later this year.

A new IMF assessment of global reserve needs, conducted once every five years, shows a clear need for additional SDRs as countries struggle to cope with the coronavirus pandemic, sources briefed on the matter said. No details of the assessment were immediately available.

Georgieva began pushing for a new SDR allocation a year ago, but met strong resistance from the United States, the largest shareholder in the global lender, under the Republican former Trump administration.

Both the Group of Seven advanced economies and the larger Group of 20 major economies backed the move in recent weeks after new U.S. Treasury Secretary Janet Yellen offered her qualified support while also demanding greater transparency about how the SDRs would be used and traded.