Botswana allocated P3 billion worth of SDR by IMF

Botswana will receive $266 million from the International Monetary Fund (IMF) Special Drawing Rights (SDR) allocation.

Sponsored

The Washington headquartered global fund has triggered its Special Drawing Rights article to  allocate a whooping $650 billion to member States, the largest in history by far.

The Special Drawing Right (SDR) is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries.

The SDR is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro, pound sterling and Chinese Renminbi.

It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members.

The SDR is an accounting unit for IMF transactions with member countries – and a stable asset in countries’ international reserves.

SDR allocations are distributed in proportion to countries’ participation in the IMF capital, which in turn closely relate to the size of their economies.

Of a possible US$650 billion SDR allocation, $274 billion would go to emerging and developing countries, a 10% boost to their international reserves, and in some cases, doubling them.

Low-income countries would receive about $21 billion, in some cases more than 6% of their GDP.

Since the start of the pandemic, the IMF has already mobilized $15 billion in SDRs voluntarily pledged by some members that can be lent to low-income countries at zero interest rate.

While this might not sound like much to the largest economies, it can be very significant for the poorest countries in the world, particularly during a devastating crisis.

There have been three prior general allocations. The most recent was in 2009, during the Global Financial Crisis, when the IMF allocated the equivalent of $250 billion in new SDRs to its membership.

It is widely seen as having contributed to stabilizing financial conditions around the world.

An SDR allocation is cost free. Allocating SDRs does not require contributions from donor countries’ budgets.

SDRs are a reserve asset, not foreign aid. Most importantly, an SDR allocation does not add to any country’s public debt burden

Sponsored
Total
4
Shares
Leave a Reply

Your email address will not be published.

Related Posts