The Board of Governors of the International Monetary Fund (IMF) has approved a general allocation of Special Drawing Rights (SDRs) equivalent to $650 billion (about SDR 456 billion) to boost global liquidity.
The Washington-based institution which disclosed this in a statement yesterday, revealed that Nigeria would be allocated about $3.35 billion out of the sum.
SDRs are supplementary foreign exchange reserve assets defined and maintained by the IMF. They are units of account for the IMF, and not a currency per se. Also, they represent a claim to currency held by IMF member countries for which they may be exchanged. SDRs were created in 1969 to supplement a shortfall of preferred foreign exchange reserve assets, namely gold and United States dollars.
“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.
“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis,” IMF’s Managing Director, Kristalina Georgieva, was quoted to have said.
It revealed that the general allocation of SDRs would become effective on August 23, 2021.
According to the statement, the newly created SDRs would be credited to IMF’s member countries in proportion to their existing quotas in the Fund.
About $275 billion (about SDR 193 billion) of the new allocation would go to emerging markets and developing countries, including low-income countries.
“We will also continue to engage actively with our membership to identify viable options for voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth,” Georgieva said.
According to the statement, one key option is for members that have strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT).
“Concessional support through the PRGT is currently interest free. The IMF is also exploring other options to help poorer and more vulnerable countries in their recovery efforts. A new Resilience and Sustainability Trust could be considered to facilitate more resilient and sustainable growth in the medium term,” the statement added.