The Executive Board of the International Monetary Fund (IMF), has expressed support for the allocation of Special Drawing Rights (SDR) to the tune of $650 billion for members of the Fund.
The acceptance and support for the Fund’s biggest SDR allocation since its inception follows the request made by the Managing Director of the Fund, Kristalina Georgieva.
Ms Georgieva, in March this year appealed to the Executive Directors of the IMF, to allow for the additional allocation of Special Drawing Rights (SDR) equivalent to $650 billion to further support member countries’ fight against the Covid pandemic.
According to Ms Georgieva, the new SDR allocation will provide additional liquidity to the global economic system by supplementing the reserve assets of the Fund’s 190 member countries.
Additionally, it will help support global recovery from the COVID-19 crisis.
Her request for the $650 billion SDR made in March received the full support of the Fund’s Executive Board on Friday, July 9, 2021.
Despite the backing of the IMF’s Executive Board, the final approval and disbursement of the SDR allocation is subject to the approval of the Board of Governors of the Fund.
“The IMF Executive Board yesterday concurred in my proposal for a new general SDR allocation equivalent to US$650 billion – the largest allocation in the IMF’s history – to address the long-term global needs for reserves during the worst crisis since the Great Depression.
“I will now present 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.”
“ 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,” stated Ms Georgieva following the Executive Board’s approval.
If finally approved, Ghana, along with its peers on the African Continent are expected to benefit from the $650 billion SDR by way of funds provision for the acquisition of Covid-19 vaccines.
Per reports, Ghana along with other African countries will receive some $23 billion out of the $650 billion SDR allotted by the IMF.
The dedicated $650 billion SDR by the IMF is based on a global proposal that targets vaccinating of at least 40 percent of the total population of all countries by end-2021, and at least 60 percent by the first half of 2022.
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.