The International Monetary Fund’s injection of record $ 650 billion resources went into effect on Monday, and Managing Director Kristalina Georgieva urged wealthy states to direct part of their allocation to countries that lack the means to cope with the crisis. Covid and future challenges.
The creation of reserve assets, known as special drawing rights, is the first since 2009, just after the global financial crisis. The IMF is setting up special vehicles to help channel reserves to developing countries and already has the Trust for Growth and Poverty Reduction that provides concessional loans, it said in a statement Monday.
The fund is discussing with members the possibility of a new Resilience and Sustainability Trust, “which could use channeled SDRs to help the most vulnerable countries with structural transformation, including confronting climate-related challenges,” Georgieva said. it’s a statement. “Another possibility could be to channel SDRs to back loans from multilateral development banks.”
The record allocation is intended to address the long-term need for reserves and build confidence and build resilience and stability in the global economy. It comes at a critical time as the highly contagious delta variant of the coronavirus wreaks havoc in some countries and threatens to delay global recovery.
Reserves are allocated to the 190 members of the fund in proportion to their quota. About 70% will go to the Group of 20 Largest Economies, compared to just 3% for low-income nations.
As a result, of the $ 650 billion, about $ 21 billion will go to low-income countries and $ 212 billion to other emerging markets and developing countries, not counting China, according to calculations by the United States Department of the Treasury. United.
“Countries can use the space provided by the SDR allocation to support their economies and intensify their fight against the crisis,” Georgieva said.
In June, the Group of Seven advanced economies approved a plan to reallocate $ 100 billion of new SDRs to the poorest countries.
The reallocation will be crucial to help African countries, for which only about $ 33 billion is allocated in SDR issuance. France has committed to reallocating part of its SDR to countries on the continent.
To support countries and help ensure transparency and accountability, the IMF is providing a framework to assess the macroeconomic implications of the new allocation and how it could affect debt sustainability, according to the IMF statement. The international lender will provide regular updates on all SDR holdings, transactions and trading, including a follow-up report on SDR usage over two years.
© 2021 Bloomberg LP