As the COVID-19 crisis continues to exacerbate restrictions on government spending throughout the world, the UN chief on Tuesday welcomed the decision by the International Monetary Fund (IMF) to approve a $650 billion allocation of Special Drawing Rights to “boost liquidity”.
Secretary-General António Guterres issued a statement on the policy change towards Special Drawing Rights or SDRs, a type of foreign reserve asset that is IMF defined and maintained, as additional funding that could help to pay down debts.
He also underscored that economies not in need of access to cash should “consider channelling 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”.
Yesterday’s IMF’s allocation makes new borrowing available to the fund’s 190 member countries, roughly in proportion to their share of the global economy.
“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis”, said IMF Managing Director Kristalina Georgieva.
“The SDR 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.”
Halting debt default
The Secretary-General stressed that it is also “critical to quickly establish the proposed Resilience and Sustainability Trust at the IMF…[for] a comprehensive response and recovery, including providing more support for vaccinations and debt management and to support the efforts of developing economies in restructuring for inclusive growth”.
Last month, he urged the world’s largest economies to spearhead a global COVID-19 vaccination plan and expand debt relief to developing countries battered by the pandemic.
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Bulwark against default
He also advised supporting a new $50 billion IMF investment roadmap aimed at ending the pandemic and driving a fast recovery.
As many developing countries are “teetering on the verge of debt default”, the UN chief encouraged the G20 leading industrialized nations to channel unused SDRs to the Fund’s new resilience and sustainability plan, for these nations.
“Special Drawing Rights also need to be considered as additional funding, not deducted from Official Development Assistance”, he reminded.