Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), issued the following statement at the conclusion of an informal discussion of the IMF's Executive Directors on the technical case for a Special Drawing Rights (SDR) general allocation:
"I am very encouraged by initial discussions on a possible SDR allocation of US$650 billion. By addressing the long-term global need for reserve assets, a new SDR allocation would benefit all our member countries and support the global recovery from the COVID-19 crisis. It would also be a powerful signal of the IMF membership's determination to do everything possible to overcome the worst recession since the Great Depression.
"To this end, Executive Directors conveyed broad support among Fund members for IMF staff to formulate a proposal for a new SDR allocation equivalent to US$650 billion to provide additional liquidity to the global economic system by supplementing the reserve assets of the Fund's 190 member countries.
"I intend to present by June a formal proposal to the Executive Board to consider a new allocation of US$650 billion, based on an assessment of IMF member countries' long-term global reserve needs, and consistent with the Articles of Agreement and the IMF's mandate. IMF staff will develop new measures to enhance transparency and accountability in the use of SDRs while preserving the reserve asset characteristic of the SDR. In parallel, staff would also explore options for members with strong financial positions to reallocate SDRs to support vulnerable and low-income countries.
"If approved, a new allocation of SDRs would add a substantial, direct liquidity boost to countries, without adding to debt burdens. It would also free up badly needed resources for member countries to help fight the pandemic, including to support vaccination programs and other urgent measures. And it would complement the range of tools deployed by the IMF to support our membership in this time of crisis."
Under the IMF's Articles of Agreement, the Managing Director may make a proposal of an SDR allocation if the Managing Director is satisfied that the allocation would help meet a long-term global need to supplement existing reserve assets in a manner that will avoid stagnation and deflation as well as excess demand and inflation, and there is broad support among IMF members for the allocation. Once the Managing Director's proposal is concurred in by the Executive Board, it would be submitted to the Board of Governors whose decision approving an SDR allocation would require support by members representing 85 percent majority of the total voting power. SDR allocations are distributed across the IMF membership in proportion to IMF quota shares.