In order to boost global liquidity and to curb COVID-19 impact, the Board of Governors of the International Monetary Fund (IMF) has approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion (about SDR 456 billion) w.e.f. August 23, 2021. It is the largest SDR allocation in the history of the IMF.
Key Points:
i.About US$275 billion (about SDR 193 billion) of the new allocation will be utilized towards emerging markets, developing countries, and low-income countries.
ii.Under SDR process, the wealthier member countries can voluntarily lend part of their SDRs to low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT) which is currently interest free.
About SDR:
Created by the IMF in 1969, it is an international reserve asset to supplement the official reserves of its member countries by providing liquidity. It should be noted that the SDR is not a currency, it is a potential claim on the freely usable currencies of IMF members.
- These currencies are the US dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound.
- To date, a total of SDR 660.7 billion (equivalent to about US$943 billion) have been allocated, including above allocation.
Recent Related News:
In its July 2021 World Economic Outlook (WEO) titled ‘Fault Lines Widen in the Global Recovery’, the IMF has reduced India’s Gross Domestic Product (GDP) growth forecast in FY22 to 9.5% from 12.5% (April 2021 projection) and raised the growth forecast for FY23 to 8.5% from 6.9%.
About International Monetary Fund (IMF):
Establishment– 1944
Managing Director– Kristalina Georgieva
Economic Counsellor and Research Department Director– Gita Gopinath
Members– 190 Countries (Including India)
Headquarters- Washington, D.C, United States (US)
