MercoPress. South Atlantic News Agency

At the end of August IMF injects 250 billion USD to member countries

The move is geared to provide liquidity to the global economy

The International Monetary Fund announced Thursday it would begin to inject 250 billion US dollars into member nations' treasuries to cushion the blows of the global economic crisis. The action is part of a 1.1 trillion US dollar plan agreed by Group of 20 leaders in early April to tackle the global financial and economic crisis.

The IMF board of governors approved the allocation to its 186 members “to provide liquidity to the global economic system by supplementing fund's member countries' foreign exchange reserves”.

“The general SDR allocation is a key example of a cooperative multilateral response to the global crisis, offering significant support to the fund's members in this challenging period,” the IMF said.

The allocation plan of SDR equivalent to 250 billion dollars is by far the largest general SDR allocation in the institution's six-decade history. The disbursement takes effect on August 28.

The IMF has explained that some members may choose to sell part or all of their allocations to other members in exchange for hard currency -- for example, to meet balance of payments needs -- while other members may choose to buy more SDR as a means of reallocating their forex reserves.

The board of governors approved the special SDR allocation on August 7, following its July 17 endorsement by the executive board. The operation will increase each member country's allocation of SDR by roughly 74% of its quota in the fund, which is broadly based on the member's relative size in the global economy.

The distribution dwarfs the total 21.4 billion SDR (33 billion dollars) allocated in yearly instalments through two previous general allocations: 9.3 billion SDR in 1970-1972 and 12.1 billion in 1979-1981.

The IMF also announced a special SDR allocation of 33 billion dollars would be made on September 9. The special allocation was authorized by an amendment to the IMF Articles of Agreement proposed in September 2007. On August 5 the United States joined 133 other members in supporting the amendment, meeting the majority threshold.

“The special allocation will make the allocation of SDR more equitable and correct because countries that joined the fund after 1981 -- more than one fifth of the current IMF membership -- had never received an SDR allocation,” it said.

Thirty-nine countries have joined the IMF after 1981, including Russia, the former Soviet bloc countries and Switzerland.

The largest of the new SDR allocations will go to the most advanced economies because of their relatively heavier quotas. The United States, the biggest stakeholder, will get a combined SDR allocation of 30.4 million SDR, or roughly 47.3 billion dollars.

The IMF underscored that “nearly 100 billion dollars of the general allocation will go to emerging markets and developing countries, of which low-income countries will receive over 18 billion dollars.”