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UN Scribe Welcomes IMF Decision On $650billion Allocation To Boost Liquidity

UN Secretary-General, António Guterres, on Tuesday welcomed the decision by the International Monetary Fund (IMF) to approve a 650 billion dollars allocation of its Special Drawing Rights (SDRs) to boost liquidity.

Guterres said the approval came at a time when fiscal constraints had been worsened by the COVID-19 crisis.

The secretary-general appealed to economies who would not need the boost to channel it to other countries

“It will be important for the economies who do not need this boost to consider channeling these resources to vulnerable low and middle-income countries that need a liquidity injection by replenishing the IMF’s Poverty Reduction and Growth Trust Fund.

“It is also critical to quickly establish the proposed Resilience and Sustainability Trust at the IMF to support a comprehensive response and recovery, including providing more support for vaccinations.

“Also, to include debt management and to support the efforts of developing economies in restructuring for inclusive growth,’’ he said.

 

In a statement from IMF on Monday, the Board of Governors said the general allocation of SDRs would become effective on Aug. 23.

The UN correspondent of the News Agency of Nigeria (NAN) reports that SDRs is an international reserve asset created by the IMF to supplement the official reserves of its member countries.

The SDRs is not a currency but a potential claim on the freely usable currencies of IMF members and as such could provide a country with liquidity.

It is defined by a basket of currencies such as the U.S. dollar, Euro, Chinese Yuan, Japanese Yen and the British Pound.

According to the statement, the newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the fund.

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It stated that about 275 billion dollars (about SDRs 193 billion) of the new allocation would go to emerging markets and developing countries, including low-income countries.

Managing Director of IMF, Ms Kristalina Georgieva, said it was a historic decision.

According to her, it is the largest SDRs allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.

“The SDRs allocation will 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.

“We will also continue to engage actively with our membership to identify viable options for voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries.

“This is to support their pandemic recovery and achieve resilient and sustainable growth,” Georgieva said.

She said that one key option was for members that had 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).

She also said that concessional support through the PRGT was currently interest free as the IMF was also exploring other options to help poorer and more vulnerable countries in their recovery efforts.

 

 

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