The International Monetary Fund (IMF) recently announced massive funding of $650 billion to help member countries fight Covid-19 and will be effective from August 23rd this year, according to media reports. According to a statement released by the IMF, the creation of the reserve assets, also known as special drawing rights (SDR) , is the first since the $250 billion issued following the global financial crisis in 2009.
The member countries will receive SDRs backed by dollars, euros, yen, sterling and yuan, in accordance with their existing quota shareholdings in the fund.
IMF Managing Director Kristalina Georgieva released a statement, saying, “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 channelling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth.”
German Finance Minister Olaf Scholz called this move unprecedented in history and the step is going to provide the much-needed additional liquidity and the stabilisation of the global economy. Georgieva also mentioned that the IMF will continue to actively engage with members to identify better-suited options for rich countries receiving SDRs so that they can be channelled to the poor countries that are in dire need of funds.