The IMF managing director, Kristalina Georgieva
The International Monetary Fund’s (IMF) executive directors will consider a possible extra SDR allocation of $650 billion to help the global recovery from the COVID-19 pandemic, the IMF announced on Wednesday.
The announcement came 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 $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,” said Kristalina Georgieva, the IMF’s managing director.
To this end, the executive directors conveyed broad support among the fund members for IMF staff to formulate a proposal for a new SDR allocation to provide additional liquidity to the global economic system by supplementing the reserve assets of the fund’s 190 member countries, according to Georgieva.
Georgieva also said that a formal proposal will be presented to the IMF’s executive board by June to consider a new allocation of $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.
She added that the 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, according to the managing director.
“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,” Georgieva explained.
Under the IMF’s Articles of Agreement, the IMF’s managing director may make a proposal of an SDR allocation in case that 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 approved by the executive board, it would be submitted to the Board of Governors, whose decision to approve 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 quota shares.
The IMF’s total lending commitments stand at over $285 billion, out of $1 trillion lending capacity, with more than one third approved since late March 2020.