The Board of Governors of the International Monetary Fund (IMF), has approved a general allocation of Special Drawing Rights (SDRs) equivalent to 650 billion dollars (about SDR 456 billion) to boost global liquidity.
In a statement issued on Tuesday in Washington DC, the board gave the approval on Monday.
It also said that the general allocation of SDRs would become effective on Aug. 23.
It added that the newly created SDRs would be credited to IMF member countries in proportion to their existing quotas in the fund.
According to it, about 275 billion dollars (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.
Managing Director, Ms Kristalina Georgieva, said it was a historic decision.
According to her, it is the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.
“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence and foster the resilience and stability of the global economy.
“It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis.
“We will also continue to engage actively with our membership to identify viable options for voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries.
“This is to support their pandemic recovery and achieve resilient and sustainable growth”, Georgieva said.
The IMF said that one key option was for members that had strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT).
It also said that concessional support through the PRGT was currently interest free as the IMF was also exploring other options to help poorer and more vulnerable countries in their recovery efforts.
A new Resilience and Sustainability Trust could be considered to facilitate more resilient and sustainable growth in the medium term, it said.
The News Agency of Nigeria (NAN), reports that the SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries.
The SDR is not a currency but a potential claim on the freely usable currencies of IMF members and as such could provide a country with liquidity.
It is defined by a basket of currencies such as the U.S. dollar, Euro, Chinese Yuan, Japanese Yen and the British Pound.