The International Monetary Fund (IMF) has approved USD650 billion lending capacity rise in a bid to help poor nations financially.
The program which had been given initial clearance by the board of governors in mid-June will kick in on August 23, 2021.
“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. It will particularly help our most vulnerable countries struggling to cope with the impact of the Covid-19 crisis,” said IMF head Kristalina Georgieva in a statement.
SDRs are supplementary foreign exchange reserve assets used as the units of account for the IMF, and not a currency. They represent a claim to currency held by IMF member countries for which they may be exchanged.
Read: Public Servants Face Huge Wage Cuts As IMF Makes Demands On Wage Bill
New SDRs will be allocated to member countries in proportion to their IMF quota while emerging and developing nations will receive $275 billion.
“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,” added Georgieva.
The value of SDRs is based on five international currencies including the dollar, the euro, the pound, the renminbi or yuan and the yen.
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.
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