Sierra Leone: Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), issued a statement at the conclusion of an informal discussion of the IMF’s Executive Directors on the technical case for a Special Drawing Rights (SDR) general allocation.
“I am very encouraged by initial discussions on a possible SDR allocation of US$650 billion. By addressing the long-term global need for reserve assets, a new SDR allocation would benefit all our member countries and support the global recovery from the COVID-19 crisis. 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” she said.
To this end, Executive Directors, she says conveyed broad support among Fund members for IMF staff to formulate a proposal for a new SDR allocation equivalent to US$650 billion to provide additional liquidity to the global economic system by supplementing the reserve assets of the Fund’s 190 member countries.
According to her, she intends 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.
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. In parallel, staff would also explore options for members with strong financial positions to reallocate SDRs to support vulnerable and low-income countries.
“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.”
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. So far SDR 204.2 billion (equivalent to about US$293 billion) have been allocated to members, including SDR 182.6 billion allocated in 2009 in the wake of the global financial crisis. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
The Fund has allocated a total of SDR 204.2 billion (equivalent to about US$318 billion), including three general allocations and a one-time special allocation. Specifically, SDR 9.3 billion was allocated in yearly instalments in 1970–72, SDR 12.1 billion was allocated in yearly instalments in 1979–81 and SDR 161.2 billion was allocated on August 28, 2009, by far the biggest allocation to date.
A special one-time allocation of SDR 21.5 billion took effect on September 9, 2009 to correct for the fact that members that had joined the IMF after 1981 had never received an allocation. In addition, new members to the Fund receive an SDR allocation upon their participation in the SDR Department.
ZIJ/6/04/2021