IMF approves record 550 billion special drawing rights allocation

The board of governors of the International Monetary Fund (IMF) has approved the allocation of special drawing rights (SDRs) worth some $650 billion (€547.316 billion at current exchange rates) to "shore up global liquidity", the institution announced.

This general SDR allocation, the first since August 2009, will come into effect on 23 August. The new SDRs will be credited to IMF member countries in proportion to their current quotas in the institution.

In addition, about $275 billion (€231.557 billion) of the new allocation will go to emerging market and developing countries, including low-income countries.

"This is a historic decision: the largest SDR allocation in the IMF's history and a boost to the global economy in the midst of an unprecedented crisis," said IMF Managing Director Kristalina Georgieva, who said the new allocation will address the global need for reserves, boost confidence, and promote resilience and stability in the world economy. 

In this regard, the IMF has raised the possibility of member countries with strong external positions voluntarily distributing part of their SDRs to increase lending to low-income countries that they can access through the IMF's Poverty Reduction and Growth Trust (PRGT).

The IMF is also exploring other options to assist the poorest and most vulnerable members in their recovery efforts and a new Resilience and Sustainability Trust Fund could be considered to facilitate more resilient and sustainable growth over the medium term.

The IMF last issued new SDRs in August 2009, during the Great Recession, when it made a $250 billion (€211.389 billion) allocation of this virtual currency among the institution's members, although opposition from the US administration under President Donald Trump put the brakes on a new allocation to address the COVID-19 crisis.

The SDR is an international reserve asset created in 1969 by the IMF to supplement the official reserves of member countries and which can be exchanged for freely usable currencies. As of March 2016, 204.1 billion SDRs (equivalent to about €241 billion) had been created and allocated to member countries.

Its value is calculated on the basis of a basket of five currencies (US dollar, euro, yuan, yen and pound sterling).