IMF considers plan to issue as much as US$650b in reserves

[NEW YORK] The International Monetary Fund is considering a plan to create as much as US$650 billion in additional reserve assets to help developing economies cope with the pandemic, with an eye on making a decision next month, according to two people familiar with the plan.

The institution's executive board is discussing the staff proposal informally on Tuesday, and one of the priorities will be to consider how much to issue in the units known as special drawing rights, according to the people, who spoke on condition of anonymity because the talks are private.

Attention is now focused on a US$650 billion issuance, according to the people, after previous talk of US$500 billion.

The IMF press office declined to comment. IMF Managing Director Kristalina Georgieva is expected to release a statement after the meeting, one of the people said.

Momentum has been building for the injection of funds after US Treasury Secretary Janet Yellen leaned toward supporting the action, reversing opposition last year under President Donald Trump. Her predecessor, Steven Mnuchin, blocked the move in 2020, saying that because reserves are allocated to all 190 members of the IMF in proportion to their quota, some 70 per cent would go to the Group of 20, with just 3 per cent for the poorest developing nations.

An SDR issuance of roughly US$650 billion would be about the maximum that the US can support without getting approval from Congress, depending on the exchange rate. Representative French Hill, an Arkansas Republican on the House Financial Services Committee, has urged opposition to an issuance, calling it a "giveaway to wealthy countries and rogue regimes" such as China, Russia and Iran.

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