IMF activates $650 billion SDR to boost global economy
Modupe Shodeinde
Nigeria to receive $3.38bn
THE International Monetary Fund (IMF), on Monday, announced the activation of the Special Drawing Rights (SDR) to help member countries combat the effects of Covid-19.
This was made known by Ms Kristalina Georgieva, the Managing Director of IMF, known in a statement.
With the distribution of the SDR based on member countries’ quota share in the global body, Nigeria, with 0.05 per cent share, is positioned to get $3.38billion.
The IMF boss said, “The largest allocation of Special Drawing Rights (SDRs) in history— about $650 billion—comes into effect today (Monday). The allocation is a significant shot in the arm for the world and if used wisely, a unique opportunity to combat this unprecedented crisis.”
According to her, the SDR allocation will provide additional liquidity to the global economic system – supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt, adding that countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis.
Georgieva stated further, “SDRs are being distributed to countries in proportion to their quota shares in the IMF. This means about $275 billion is going to emerging and developing countries, of which low-income countries will receive about $21 billion – equivalent to as much as six per cent of GDP in some cases.
“SDRs are a precious resource and the decision on how best to use them rests with our member countries. For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well-informed.
“To support countries, and help ensure transparency and accountability, the IMF is providing a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability. The IMF will also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years’ time.”
She added that to magnify the benefits of the allocation, the IMF would encourage voluntary channelling of some SDRs from countries with strong external positions to countries most in need.
She said, “Over the past 16 months, some members have already pledged to lend $24 billion, including $15 billion from their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust, which provides concessional loans to low-income countries. This is just a start, and the IMF will continue to work with our members to build on this effort.
“The IMF is also engaging with its member countries on the possibility of a new Resilience and Sustainability Trust, which could use channelled SDRs to help the most vulnerable countries with structural transformation, including confronting climate-related challenges. Another possibility could be to channel SDRs to support lending by multilateral development banks.
“This SDR allocation is a critical component of the IMF’s broader effort to support countries through the pandemic, which includes: $117 billion in new financing for 85 countries; debt service relief for 29 low-income countries; and policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery.”
