The International Monetary Fund (IMF) Board of Governors has approved the largest support in its history, amounting to $650 billion, to assist countries in coping with the growing challenges posed by the COVID-19 pandemic. The fund stated in a statement that the board has approved a general allocation equivalent to $650 billion in Special Drawing Rights (456 billion units) to support global liquidity.
Kristalina Georgieva, the IMF Managing Director, remarked, "This is a historic decision; this is the largest allocation of Special Drawing Rights in the fund's history, serving as a vaccination injection in the arm of the global economy during an unprecedented crisis." According to Georgieva, this distribution will include all member countries, addressing the long-term global need for reserves and enhancing the resilience and stability of the global economy. This distribution will particularly aid the most vulnerable countries struggling to overcome the impacts of the COVID-19 crisis.
Georgieva added, "We will continue to actively engage with our member countries to identify potential options for voluntarily reallocating Special Drawing Rights from wealthier member countries to poorer and more vulnerable nations to support their recovery efforts and achieve resilient and sustainable growth."
This general allocation of Special Drawing Rights will take effect on August 23, 2021, and member countries will receive the newly issued Special Drawing Rights units in proportion to their current quotas in the fund. Approximately $275 billion (about 193 billion Special Drawing Rights) of the new allocation will be distributed to emerging markets and developing countries, including low-income nations.
According to the fund's statement, one of the key options available in this regard is for member countries with strong external positions to voluntarily reallocate part of their Special Drawing Rights to support targeted lending to low-income countries through the Poverty Reduction and Growth Trust (PRGT). This concessional financing is provided at zero interest, while the fund is also exploring other options to assist the poorest and most vulnerable countries in their recovery efforts. The statement mentioned the possibility of considering the establishment of a trust fund for resilience and sustainability to facilitate access to more resilient and sustainable growth in the medium term.
