WASHINGTON, Aug 2 - The International Monetary Fund said on Monday that its board of governors approved a $650 billion allocation of special drawing rights of the IMF and said its largest-ever distribution of monetary reserves would become effective Aug. 23.
IMF Member countries will receive SDRs - the fund's unit of exchange, funded by dollars, euros, yen, sterling and yuan - in proportion with their existing quota shareholdings in the fund. In a long time, the approval of the IMF was long expected by all 190 member states
The SDR allocation will benefit all members, address the long-term need for reserves, build confidence and foster resilience and stability in the global economy, IMF Managing Director Kristalina Georgieva said in a statement.
It will particularly help our most vulnerable countries struggling with the impact of COVID -19 crisis, she said, adding that about $275 billion from the allocation will go to emerging markets and low-income countries.
The move was hailed as unprecedented in German history by Olaf Scholz, minister of finance. The step would help to stabilize the global economy and provide additional liquidity, he said.
Scholz said in particular that emerging and developing countries will be given a new boost for fighting the economic consequences of the coronavirus pandemic, Inc.
Georgieva said the IMF will continue to actively engage with members to identify viable solutions for poor countries that get SDRs to channel them to richer countries that need them more. A key option is for low-income countries to contribute SDRs to the existing IMF Poverty Reduction and Growth Trust for wealthy countries, she said.
She added that the IMF was still considering a new trust for SDRs to facilitate sustainable growth in the medium term, which reflects little change from discussions in July.
The IMF's last SDR distribution came in 2009 when member countries received $250 billion in SDR reserves to help ease a global financial crisis.
To exchange their SDRs, countries would first have to exchange them for willing foreign currency, requiring them to find underlying hard partner country.