IMF distributes US$650b in emergency reserve funds to poor nations to fight Covid
Washington
THE International Monetary Fund distributed US$650 billion in emergency reserve funds on Monday to help poor countries combat the corona-virus pandemic and pay down debt.
The distribution was the largest such expansion of currency reserves, known as Special Drawing Rights, in the IMF's history. The world is grappling with a two-track economic recovery, with poorer countries lagging behind in vaccinating their populations and experiencing slower growth, and as the Delta variant of the virus is leading to a rise in cases.
"The allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis," Kristalina Georgieva, the IMF's managing director, said in a statement.
A Special Drawing Right (SDR) is essentially a line of credit that allows member countries of the IMF to cash it in for hard currency. Its value is based on a basket of international currencies and is reset every five years. Each of the 190 IMF member countries gets an allotment of the currency reserves based on its shares in the fund, which tracks with the size of a country's economy.
The currency reserves have been the subject of controversy within the United States in recent weeks, with Republican lawmakers accusing the Biden administration of enriching US adversaries such as China, Russia and Iran by backing the allocation.
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Other countries also expressed some concern last week after the Taliban toppled Afghanistan's government and, under pressure from its members, the IMF suspended the distribution of more than US$400 million worth of SDRs that Afghanistan was expected to receive.
The Treasury Department backed the allocation and Treasury Secretary Janet Yellen had said that the United States would not engage in SDR transactions with adversaries such as Russia and Iran, making it unlikely that they would receive much of a benefit from the additional currency reserves.
Countries could exchange their SDRs for other currencies, however, and there are no restrictions on how the money is used.
Through the allocation, Russia is receiving US$17.6 billion of the reserve funds, Iran gets US$4.8 billion and Syria gets US$390 million, according to a tabulation by Jubilee USA, an organisation that supports poverty reduction.
The fact that Afghanistan and Venezuela will not have access to the reserve funds because of doubts among IMF members about the legitimacy of their governments raised new questions on Monday about whether the US, the largest IMF shareholder, should be pressuring the fund to block other countries from receiving billions of dollars worth of SDRs.
Republican Representative French Hill of Arkansas said on Monday that the Treasury Department should have pressured the IMF to suspend distribution of reserve funds to Belarus, Russia and Syria. "They chose not to," Mr Hill said on Twitter, adding that the process needs to be reformed.
The IMF said on Monday that as a result of the new distribution, US$275 billion was going to emerging and developing countries. It is encouraging wealthy countries to voluntarily channel some of their reserve assets to those that are most in need.
Mindful of concerns, the IMF said it would produce regular transaction reports on how the funds are being used. NYTIMES
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