The International Monetary Fund (IMF) has approved the largest-ever release of monetary reserves, totaling $650 billion, to stimulate the global economy and assist emerging and low-income countries in dealing with the rising debt and Covid-19 crises.
On Monday, the IMF’s board of governors convened in Washington and authorized this unprecedented allotment of Special Drawing Rights (SDR). Pakistan, which has had 23 financial arrangements with the IMF to far, would also profit from the increase.
The universal allotment of SDRs will go into effect on August 23 of this year.
The IMF also granted a 39-month Extended Agreement under the Extended Fund (EFF) to Pakistan in the amount of SDR 4.268 billion, or about $6 billion, in December 2019. This is comparable to 210 percent of SDR 2031 million of Pakistan’s appropriations. The SDR is a basket of currencies made available to member countries.
“This is a historic decision — the largest SDR allocation in IMF history and a shot in the arm for the global economy in an unprecedented crisis,” said IMF Managing Director Kristalina Georgieva in a statement announcing the decision.
“The SDR distribution will benefit all members, meet the long-term global demand for reserves, encourage trust, and strengthen the global economy’s resilience and stability,” she added. “It will be especially beneficial to our most vulnerable nations as they grapple with the consequences of the Covid-19 crisis.”
The IMF, which has been the principal worldwide organization of monetary cooperation for 75 years, has overall resources of roughly $790 billion, although its resources can be supplemented by its members’ international reserves. The IMF developed the SDR in 1969 to augment member nations’ other reserve assets. The US dollar, Japanese yen, euro, pound sterling, and Chinese renminbi are all included in the SDR currency basket.
SDRs are both the IMF’s assets and liabilities. They are distributed to members by their IMF quota shares. A member can transfer SDR to another member in exchange for credit in either convertible or hard money.