The International Monetary Fund (IMF) has approved the allocation of special drawing rights (SDRs) equivalent to $650 billion (about SDR 456 billion) to help boost global liquidity.
SDR is an international reserve asset created by the United Nations specialized 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.
Reuters had reported that the SDR allocation could see Nigeria’s external reserves rising by as much as 20 percent.
In June, Akinwumi Adesina, president of the African Development Bank (AfDB), had also said G7 countries agreed to reallocate $100 billion in their IMF SDR to African states by October.
In a statement on Monday, IMF said it is the largest SDR allocation in its history.
Kristalina Georgieva, IMF managing director, said the allocation will benefit all members and address long-term global needs.
“This is a historic decision – 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,” Georgieva said.
“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.
“The general allocation of SDRs will become effective on August 23, 2021. The newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund.”
The IMF also announced that out of the new allocation scheme, $275 billion (equivalent to SDR 193 billion) would go to emerging markets and developing countries, including low-income nations.
The agency asked its members with 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).
The IMF further said it is exploring other options to help poorer and more vulnerable countries in their recovery efforts.
It added that a new resilience and sustainability trust could be considered to facilitate more resilient and sustainable growth in the medium term.