BASSETERRE, St. Kitts – THE Executive Board of the International Monetary Fund (IMF) has given its support to granting 250 billion worth of Special Drawing Rights (SDRs) to provide liquidity to its 186 member countries.
SDRs are essentially assets allocated to member countries that count toward a nation’s reserve assets and would reduce the need for excessive self-insurance.
An IMF press release issued yesterday (Jul. 20) revealed that the amount of SDR, equivalent to almost US$100 billion, is set to be directed toward emerging markets and developing countries. Over US $18 billion has been reserved for low-income countries. The release also informs that the proposal will now be submitted to the IMF’s Board of Governors for final approval.
“The SDR allocation is a key part of the Fund’s response to the global crisis, offering significant support to its members in these difficult times,” IMF Managing Director Dominique Strauss-Kahn said. “The allocation is a prime example of a cooperative monetary response to the global financial crisis.”
The SDR allocation was initially requested as part of a US$1.1 trillion plan agreed at the G-20 Summit in London in April of this year. It was subsequently endorsed by the International Monetary and Financial Committee to “tackle the global financial and economic crisis by restoring credit, growth and jobs in the world economy”.
According to the press release, once approved by the Board of Governors with an 85 percent majority in a vote scheduled to close on August 7, the SDR allocation will be in effect by August 28.
Borrowing countries may choose to sell part or all of their SDR allocation to other members in exchange for hard currency, while others can buy more SDRs as a means of reallocating their reserves.
