IMF Allocates $650 Billion for Covid Recovery

Managing Director of International Monetary Fund (IMF) Kristalina Georgieva. Photo: IMF (file photo)
Managing Director of International Monetary Fund (IMF) Kristalina Georgieva. Photo: IMF (file photo)

The SDR allocation is expected to boost the liquidity and reserves of all member countries.

Ms. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), has welcomed the Executive Board’s decision supporting the general allocation of Special Drawing Rights (SDRs).

In her statement released on July 9, she said that the IMF Executive Board has concurred with her proposal for a new general SDR allocation equivalent to US$650 billion. It is the largest allocation in the IMF’s history and aims to address the long-term global needs for reserves during the worst crisis since the Great Depression.

The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries. The SDR is not a currency. It is a potential claim on the freely usable currencies of IMF members. 

As such, SDRs can provide a country with liquidity. A basket of currencies defines the SDR: the US dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound.

“I will now present the new SDR allocation proposal to the IMF’s Board of Governors for their consideration and approval. If approved, we expect the SDR allocation to be completed by the end of August,” Ms. Georgieva said.

The SDR allocation is expected to boost the liquidity and reserves of all member countries, build confidence, and foster the resilience and stability of the global economy. 

“The SDR allocation will help every IMF member country – particularly vulnerable countries – and strengthen their response to the Covid-19 crisis,” Ms. Georgieva added in her statement.

According to the statement, IMF will maintain active engagement with its membership in the months ahead to identify viable options for voluntary channeling of SDRs from wealthier members to support the poorer and more vulnerable countries to help their pandemic recovery and achieve resilient and sustainable growth, which will also help boost global economic recovery.

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Rakesh Raman