The International Monetary Funda's (IMF) Board of Directors Monday approved the disbursement of SDRs for a total amount of US $ 650,000 million as a relief measure amidst the coronavirus pandemic.
The ensuing liquidity “will help the most vulnerable member countries that are fighting the ravages of the crisis caused by Covid-19,” IMF Managing Director Kristalina Georgieva explained.
Following the IMF's announcement, Argentine economy authorities said they expected to receive US $ 4,354 million, while other sources have estimated that approximately US $ 275 billion would go to either emerging markets or low-income states.
This is a historic decision: the largest SDR allocation in IMF history and a boost of encouragement to the world economy amid an unprecedented crisis. The SDR allocation will benefit all member countries, address the need for reserves. on a global scale and in the long term, it will build trust and promote the resilience and stability of the global economy. In particular, it will help the most vulnerable member countries that are fighting the ravages of the crisis caused by Covid-19, the Bulgarian Georgieva said.
She added that the organization will continue to analyze the most viable options that allow for the voluntary channeling of SDRs from the richest member countries to the poorest and most vulnerable, to support their economic recovery and, in addition, to achieve resilient and sustainable growth.
The creation of reserve assets, known as special drawing rights (SDRs), is the first since the $ 250 billion it issued just after the 2009 global financial crisis. The IMF defines SDRs as an international reserve asset that can complement the reserve assets of member countries participating in the SDR Department.
As per IMF regulations, “an overall SDR allocation should be focused on meeting the long-term global need to supplement reserve assets and requires approval by the Board of Governors with a majority of 85% of the total vote. Once agreed, the allocation is distributed to member countries in proportion to their relative share in the IMF. Members of the IMF can also carry out voluntary exchanges of SDRs for currencies with each other.”
Argentine Economy Minister Martín Guzmán said the new SDR allocations stemmed from the claim by a group of countries, including Argentina, who have raised the need for a such an assistance. The initiative fell into deaf ears during 2020 but things changed once Joseph Biden replaced Donald Trump as President of the United States.
Argentine Vice President Cristina Fernández de Kirchner would reportedly use the allocation by the IMF to deal with loans taken with that body under former President Mauricio Macri (2015-2019) instead of injecting that money as a booster to new economic developments.