IMF to present plan to create $650 bln new SDR to executive board in June
The International Monetary Fund (IMF) plans to present a formal proposal to its executive board for consideration of allocation of $650 billion Special Drawing Rights (SDR) to its 170 members.
In a statement, the IMF managing director, Kristalina Georgieva said “I intend to present by June a formal proposal to the Executive Board to consider a new allocation of $650 billion, based on an assessment of IMF member countries’ long-term global reserve needs,
The decision, she said flows from the broad support among Fund members after an informal discussion by the executive directors of the IMF on Tuesday.
According to Georgieva, “a new SDR allocation would benefit all our member countries and support the global recovery from the COVID-19 crisis.”
She said the allocation of the $650 billion SDR will help address the long-term global need for reserve assets.
“It would also be a powerful signal of the IMF membership’s determination to do everything possible to overcome the worst recession since the Great Depression.
READ THIS ALSO: Ecobank Group posts 9% growth in revenue to N642 Bln in 2020 FY
She said The SDR will “provide additional liquidity to the global economic system by supplementing the reserve assets of the Fund’s 190 member countries.”
The issue of the new SDR, the Fund managing director said was consistent with the Articles of Agreement and the IMF’s mandate. IMF staff will develop new measures to enhance transparency and accountability in the use of SDRs while preserving the reserve asset characteristic of the SDR.
“If approved, a new allocation of SDRs would add a substantial, direct liquidity boost to countries, without adding to debt burdens.
It would also free up badly needed resources for member countries to help fight the pandemic, including to support vaccination programs and other urgent measures. And it would complement the range of tools deployed by the IMF to support our membership in this time of crisis.”
Under the IMF’s Articles of Agreement, the Managing Director may make a proposal of an SDR allocation if the Managing Director is satisfied that the allocation would help meet a long-term global need to supplement existing reserve assets in a manner that will avoid stagnation and deflation as well as excess demand and inflation, and there is broad support among IMF members for the allocation.
Once the Managing Director’s proposal is concurred in by the Executive Board, it would be submitted to the Board of Governors whose decision approving an SDR allocation would require support by members representing 85 percent majority of the total voting power.
SDR allocations are distributed across the IMF membership in proportion to IMF quota shares.