Nigeria will receive $3.35 billion as its share of the
International Monetary Fund (IMF) $650bn special drawing rights (SDRs) to help
boost the liquidity of member countries.
Kristalina Georgieva, managing director of the IMF,
announced the deployment in a statement on Monday.
SDR is an international reserve asset created by the United
Nations specialised agency to supplement its member countries’ official
reserves.
The value of the SDR is based on a basket of five currencies
– the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the
British pound sterling. They are units of account for the IMF, not a currency
per se.
Georgieva said the SDRs will be distributed to countries in
proportion to their quota shares in the IMF.
She said $275 billion will go to emerging and developing
countries, of which low-income countries will receive about $21 billion.
“The largest allocation of Special Drawing Rights (SDRs) in
history—about US$650 billion—comes into effect today. The allocation is a
significant shot in the arm for the world and, if used wisely, a unique
opportunity to combat this unprecedented crisis,” the statement reads.
“The SDR allocation will provide additional liquidity to the
global economic system – supplementing countries’ foreign exchange reserves and
reducing their reliance on more expensive domestic or external debt. Countries
can use the space provided by the SDR allocation to support their economies and
step up their fight against the crisis.
“SDRs are being distributed to countries in proportion to
their quota shares in the IMF. This means about $275 billion is going to
emerging and developing countries, of which low-income countries will receive
about US$21 billion – equivalent to as much as 6 percent of GDP in some cases.”
The IMF boss said countries should ensure that decisions on
the use of SDRs “should be prudent and well-informed”.
She further stated that IMF would provide a framework for
assessing the macroeconomic implications of the new allocation, its statistical
treatment and governance, and how it might affect debt sustainability.
The bank would also provide regular updates on all SDR
holdings, transactions, and trading – including a follow-up report on the use
of SDRs in two years’ time.
“To magnify the benefits of this allocation, the IMF is
encouraging voluntary channeling of some SDRs from countries with strong
external positions to countries most in need,” the statement adds.
“Over the past 16 months, some members have already pledged
to lend US$24bn, including US$15 billion from their existing SDRs, to the IMF’s
Poverty Reduction and Growth Trust, which provides concessional loans to
low-income countries. This is just a start, and the IMF will continue to work with
our members to build on this effort.
“This SDR allocation is a critical component of the IMF’s
broader effort to support countries through the pandemic, which includes:
US$117 billion in new financing for 85 countries; debt service relief for 29
low-income countries; and policy advice and capacity development support to
over 175 countries to help secure a strong and more sustainable recovery.”
The new SDR allocation is the highest in the history of the
IMF.
In June, Akinwumi Adesina, president of the African
Development Bank (AfDB), said G7 countries had also agreed to reallocate $100
billion in their IMF SDR to African states by October.
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