COVID fight: IMF approves $275 billion for Ghana, other countries
The International Monetary Fund (IMF) has approved $275 billion out of a $650 billion support for Emerging Markets and Developing Countries (EMDCs) to fight COVID-19.
The funds were approved by the Board of Governors of the IMF to boost global liquidity and reduce the impact of COVID-19 on global economies.
If forms part of an international reserve asset created by the IMF to supplement the official reserves of its member countries.
The $650 Special Drawing Rights (SDRs) general allocation would become effective on August 23, 2021.
It is expected to be credited to IMF member countries in proportion to their existing quotas in the IMF.
Before this, the IMF said, “so far SDR 204.2 billion (equivalent to about US$293 billion) have been allocated to members, including SDR 182.6 billion allocated in 2009 in the wake of the global financial crisis”.
The announcement of the approval of the SDR, which was contained in a press statement of IMF on Monday, August 2, makes it the largest SDR allocation in the history of the international financial institution.
Commenting on the allocation, the IMF Managing Director, Kristalina Georgieva, said it would continue to support developing countries, especially those badly hit by the pandemic, to aid their recovery and make them resilient.
In addition, she said, “we will continue to engage actively with our membership to identify viable options for voluntary channelling of SDRs from wealthier to poorer and more vulnerable member countries.”
This is to support pandemic recovery and achieve resilient and sustainable growth.
She explained that the SDR allocation would 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,” she emphasised.
Meanwhile, a key option is for members with 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).
According to IMF, the concessional support through the PRGT is currently interest-free.
In the release, the IMF noted that it was also exploring other options to help poorer and more vulnerable countries recover.
In addition to this is a new Resilience and Sustainability Trust, which could be considered to facilitate more resilient and sustainable growth in the medium term.
Proposal for a general allocation of $650 special drawing rights
On June 25, the Executive Board discussed a proposal for a historic US$650 billion general allocation of SDRs to address the long-term global need to supplement existing reserve assets.
Following concurrence by the Executive Board on July 8, the Managing Director submitted the proposal to the Board of Governors on July 9 for its approval by August 2.
The proposal makes a case for an allocation of US$650 billion (about SDR 456 billion), based on an assessment of IMF member countries’ long-term global reserve needs. It also includes measures to enhance the transparency and accountability in the reporting and use of SDRs while preserving the reserve asset characteristic of the SDR.
The general allocation would help many EMDCs with liquidity constrained smooth needed adjustment and avoid distortionary policies while providing scope for spending on crisis response and vaccines.