African countries to benefit from IMF's $650bln package from today
The IMF is rolling out $650 billion in international reserve assets, or Special Drawing Rights (SDRs), today to help emerging and low-income countries, mostly in the continent of Africa, amid COVID-19 pandemic.
The SDRs are being distributed to countries in proportion to their quota shares in the IMF. This means about $275 billion, or 42 percent, is going to emerging and developing countries, of which low-income countries will receive about $21 billion – equivalent to as much as six percent of GDP in some cases, said the statement.
The largest allocation in IMF's history is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis, said Kristalina Georgieva, Managing Director of the IMF.
“The SDR allocation will provide additional liquidity to the global economic system – supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt. Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis," she said.
The IMF is providing a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability to support countries and help ensure transparency and accountability.
The IMF will also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years’ time, it said.
To enhance the effectiveness of this allocation, the global fund is encouraging voluntary channeling of some SDRs from countries with strong external positions to countries most in need. Over the past 16 months, some members have already pledged to lend US$24bn, including $15bn from their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust, which provides concessional loans to low-income countries.
“The IMF is also engaging with its member countries on the possibility of a new Resilience and Sustainability Trust, which could use channeled SDRs to help the most vulnerable countries with structural transformation, including confronting climate-related challenges.
Another possibility could be to channel SDRs to support lending by multilateral development banks," said Georgieva, adding that this SDR allocation is a critical component of the IMF’s broader effort to support countries through the pandemic, which includes: $117 billion in new financing for 85 countries; debt service relief for 29 low-income countries; and policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery.
