IMF backs global economy with record $650bn

The help is aimed to offset economic impact of pandemic

Photo: EPA IMF Managing Director Kristalina Georgieva

The governing body of the International Monetary Fund announced it had approved an unprecedented financial aid focused at the most vulnerable countries to the pandemic economic impact. The envisaged amount of cash is estimated at $650 billion AFP elaborated.

"This is a historic decision - the largest SDR (Special Drawing Rights) allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis," IMF Managing Director Kristalina Georgieva said in a statement. "It will particularly help our most vulnerable countries struggling to cope with the impact of the Covid-19 crisis," she said. The programme will be implemented in August. Newly issued SDRs will be allocated to member countries in proportion to their IMF quota, the Fund confirmed. Emerging and developing countries are envisaged to receive around $275 billion in total.

But "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 to support their pandemic recovery and achieve resilient and sustainable growth," Georgieva added. Richer countries could, for example, transfer their SDRs by using those attributed to them to finance the IMF's Poverty Reduction and Growth Trust Fund, which would increase the supply of loans to low-income countries.

Once issued, SDRs can be used either as a reserve currency that stabilizes the value of a country's domestic currency, or converted into stronger currencies to finance investments. For poorer countries, the interest is also to obtain hard currencies without having to pay substantial interest rates.

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