VENICE, Italy, July 9 (Reuters) – The International Monetary Fund announced on Friday that its board had backed an allocation of $ 650 billion in IMF special drawing rights, advancing the distribution of foreign exchange reserves to 190 IMF member countries for targeted completion by the end of August.
IMF Managing Director Kristalina Georgieva said she would now present the SDR allocation proposal, the largest in the Fund’s 77-year history, to its Board of Governors, with representatives from each IMF country. .
“This is a big blow to the world,” Georgieva said in a statement released ahead of the meeting of G20 finance ministers and central bank governors in Venice. “The allocation of SDRs will increase the liquidity and reserves of all of our member countries, build confidence and promote the resilience and stability of the global economy.”
In 2009, the IMF distributed $ 250 billion in SDR reserves to member countries to help ease a global financial crisis. The SDR is the IMF’s unit of exchange and consists of a basket of currencies: dollars, euros, yen, pounds sterling and yuan.
To spend their SDRs, countries would first need to exchange them for underlying hard currencies, forcing them to find a willing exchange partner country.
Georgieva said the new SDR allocation, initially backed by the major G20 economies in April, would have a positive effect on every IMF member country and especially help vulnerable countries strengthen their response to the COVID-19 crisis.
She said the Fund would actively engage with member countries in the coming months to “identify viable options for the voluntary channeling of SDRs from richer members to support our poorest and most vulnerable countries.”
G20 finance officials are expected to discuss potential mechanisms for contributing to the SDR over the next two days, to low-income countries as well as some vulnerable middle-income countries and small island states.
Reporting by David Lawder; edited by Richard Pullin
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