Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) [Photo by Reuters Yonhap News]
[Asia Economy Reporter Park Byung-hee] The International Monetary Fund (IMF) has approved the largest-ever issuance of Special Drawing Rights (SDRs) worth $650 billion to respond to COVID-19, Bloomberg reported on the 2nd (local time).
The IMF stated in a press release that "The IMF Board has approved an SDR allocation that can increase liquidity by $650 billion to help the global economy facing the COVID-19 pandemic."
Kristalina Georgieva, IMF Managing Director, called it a "historic decision," adding, "This is not only the largest SDR increase in IMF history but will also help the global economy facing an unprecedented crisis."
The IMF announced that the approved SDR increase will take effect from the 23rd. The newly increased SDRs will be allocated to IMF member countries according to their current contribution shares, with about $275 billion allocated to developing and emerging countries, including low-income nations.
SDRs are an international currency created by the IMF and are only used in the public sector by the IMF, member countries, and international organizations. Countries holding SDRs can exchange them for other member countries' currencies such as dollars or euros when facing a balance of payments deficit.
This is the first time the IMF has issued new SDRs since issuing $250 billion during the global financial crisis in 2009.
The United States opposed the issuance of SDRs during former President Donald Trump's administration, expressing dissatisfaction with the IMF contribution share ratio. However, with President Joe Biden's inauguration, the stance shifted to support.
At the G7 summit held in Cornwall, UK, last July, the G7 leaders expressed support for the IMF's SDR issuance plan. Managing Director Georgieva has also expressed hope to complete all procedures related to the SDR issuance by mid-August.
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