Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has 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.
“If approved, a new allocation of SDRs would add a substantial, direct liquidity boost to countries, without adding to debt burdens. It would also free up badly needed resources for member countries to help fight the pandemic, including supporting vaccination programs and other urgent measures. And it would complement the range of tools deployed by the IMF to support our membership in this time of crisis,” stated Ms Georgieva.
“It would also be a powerful signal of the IMF membership’s determination to do everything possible to overcome the worst recession since the Great Depression,” she emphasised.
The additional SDR allocation will imply more fiscal resources at the disposal of Ghana to fight the Covid-19 pandemic. Ghana last year alone, increased its SDR holdings with the IMF by 318 percent.
At end-November 2020, Ghana’s SDR holdings stood at Ghs 242.39 million ($42.2 million) from a previous amount of Ghs 76.18 million ($13.3 million) at end-November 2019.
Special Drawing Rights (SDR) are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund.
SDRs are units of account for the IMF, and not a currency per se. They represent a claim to currency held by IMF member countries for which they may be exchanged.
Under the IMF’s Articles of Agreement, the Managing Director may make a proposal of an 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 would be submitted to the Board of Governors whose decision approving an SDR allocation would require support by members representing 85 percent majority of the total voting power. SDR allocations are distributed across the IMF membership in proportion to IMF quota shares.
