Germany expects world financial leaders this week to back a US$650 billion new allocation of the International Monetary Fund’s Special Drawing Rights (SDR) to help countries cope with the pandemic and its economic fallout, officials said on Tuesday.
Zimbabwe could also benefit if the plan goes ahead.
The SDR payments are separate from IMF program financing, which comes with strict policy conditions, and goes into a country’s foreign exchange reserves. To turn SDRs into hard currency, an IMF member must reach an agreement with another member to buy the SDRs.
The SDR, the IMF’s internal unit of account, is made up of a basket of euro, yen, sterling and dollars and each country’s SDR allocation is based on the size of its IMF quota share, which is broadly calculated according to the size of the economy, trade and reserves.
In 2009, Zimbabwe received US$400 million in IMF special drawing rights from a total of US$250 billion global agreement to bolster the reserves of the IMF’s 186 member countries in the wake of the worldwide financial crisis which had started in 2008. The Covid-19 pandemic has brought another crisis.
“That is a reasonable figure,” a senior German finance ministry official said ahead of the virtual spring meetings of the International Monetary Fund and World Bank.
With the new U.S. administration backing the move, there is now broad agreement among IMF members to bolster the Fund’s emergency reserves and a deal this week will pave the way for the fresh money being available from August, the official said.
The new allocation will benefit countries struggling most from the pandemic as roughly 42 percent of the new funds will go to the world’s poorest countries, the official added.
Vaccination rates and economic development are diverging widely across the globe so the move to bolster IMF’s emergency reserves is meant to reduce the recovery gap between rich and poor countries. – Reuters/Business Writer