IMF Special Drawing Rights to pay out $650 BILLION to member States

The International Monetary Fund (IMF) Executive Board last week agreed to a $650 billion (over P7 trillion) Special Drawing Rights allocation, the largest in the history of IMF.

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In a statement last Friday , Managing Director of the Washington based global fund Kristalina Georgieva said the allocation is a “shot in the arm for the world that will help every member country, particularly vulnerable ones, and strengthen their response to the COVID-19 crisis”.

Under the IMF’s Articles of Agreement, the Managing Director may make a proposal for a general SDR allocation if 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 concurred in by the Executive Board, it is submitted to the Board of Governors whose decision to approve an SDR allocation requires support by members representing an 85 percent majority of the total voting power of members that are participants in the SDR Department (currently all IMF members). SDR allocations are distributed across the IMF membership in proportion to IMF quota shares.

This week IMF Managing Director Kristalina Georgieva issued her proposal to the IMF’s Board of Governors on the historic $650 billion allocation of Special Drawing Rights.

After the Board of Governors approves the proposal,  member countries will work to identify options to voluntarily channel the Special Drawing Rights from wealthier countries to more vulnerable ones.

Kristalina Georgieva said the goal is to help countries recover from the pandemic and create resilient and sustainable growth to help boost the global economic recovery. 

“I will have presented the new SDR allocation proposal to the IMF’s Board of Governors for their consideration and approval. If approved, we expect the SDR allocation to be completed by the end of August.” the IMF Chief said last week.

“ This is a shot in the arm for the world. The SDR allocation will boost the liquidity and reserves of all our member countries, build confidence, and foster the resilience and stability of the global economy. In 2009, an SDR allocation contributed significantly to recovery from the global financial crisis and I am confident that this new allocation will have a similar benefit now.”

“The SDR allocation will help every IMF member country – particularly vulnerable countries – and strengthen their response to the COVID19 crisis.”

“We will maintain active engagement with our membership in the months ahead to identify viable options for voluntary channeling of SDRs from wealthier members to support our poorer and more vulnerable countries to help their pandemic recovery and achieve resilient and sustainable growth, which will also help boost global economic recovery.”

Special Drawing Rights (SDRs) The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries. The SDR is not a currency. It is a potential claim on the freely usable currencies of IMF members.

SDRs are allocated by the IMF to countries, and cannot be held or used by private parties.The number of SDRs in existence was around XDR 21.4 billion in August 2009.

During the global financial crisis of 2009, an additional XDR 182.6 billion was allocated to “provide liquidity to the global economic system and supplement member countries’ official reserves”.

By October 2014, the number of SDRs in existence was XDR 204 billion.Due to economic stress caused by the global pandemic some economists and several finance ministers of poorer countries have called for a new allocation of $4T to support member economies as they seek ways to recover.

In March 2021 the G24 and others proposed an allocation of $500B for this purpose. The value of a SDR is based on a basket of key international currencies reviewed by IMF every five years.

The weights assigned to each currency in the XDR basket are adjusted to take into account their current prominence in terms of international trade and national foreign exchange reserves.

In the review conducted in November 2015, the IMF decided to add the Renminbi (Chinese yuan) to the basket, effective 1 October 2016.

Since that date, the XDR basket has consisted of the following five currencies: U.S. dollar 41.73%, euro 30.93%, renminbi (Chinese yuan) 10.92%, Japanese yen 8.33%, British pound 8.09%.

Botswana’s International Liquidit- the Special Drawing Rights data was reported at 85.457 USD million ( around 900 million in 2020).

This records an increase from the previous number of 81.869 USD mn for 2019. Botswana BW: International Liquidity: Special Drawing Rights data is updated yearly, averaging 7.215 USD mn from Dec 1945 to 2020, with 76 observations.

The data reached an all-time high of 145.574 USD mn in 2009 and a record low of 0.000 USD mn in 1969. Botswana. The country ‘s SDR QUOTA sits at 192 million.

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