The International Monetary Fund (IMF) has approved a record $650 billion in special drawing rights (SDRs) to 'help nations dealing with mounting debt and the fallout from the Covid-19 pandemic,' according to Bloomberg, which notes that it's the largest resource injection in the organization's history.
The creation of the reserve assets -- known as special drawing rights -- is the first since the $250 billion issued just after global financial crisis in 2009, with IMF Managing Director Kristalina Georgieva billing it as “a shot in the arm for the world” that will help boost global economic stability. -Bloomberg
"The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy," said Georgieva, framing it as a "shot in the arm for the world" which will contribute towards global economic stability.
"It will particularly help our most vulnerable countries struggling to cope with the impact of the covid-19 crisis," she added.
According to the report, the plan has been in the works for more than a year - as early progress was beset with delays after the Trump administration (the IMF's largest shareholder) blocked it early last year after then-Treasury Secretary Steven Mnuchin insisted that the funds wouldn't actually end up with the nations that need it most.
This, of course, radically changed under Mnuchin's successor, Janet Yellen - as the fund revisited options for rich nations to redistribute wealth to 'vulnerable and low-income countries.' At present, reserves are allocated to all 190 members of the IMF in proportion to their quota, while around 70% will go to the G20 largest economies. Just 3% will go to low-income nations.
As Bloomberg explains, that's about to change.
Overall, 58% of the new SDRs go to advanced economies, with 42% for emerging and developing economies. So of the $650 billion, about $21 billion go to low-income countries and $212 billion to other emerging market and developing countries, without counting China, according to U.S. Treasury Department calculations.
The Group of Seven advanced economies in June endorsed a plan to reallocate $100 billion of new SDRs to poorer countries, but the G-20 in July only specified support for a general allocation of $650 billion in SDRs, without detailing how much would re-lent. -Bloomberg
The reallocation will help impoverished countries in Africa, which will receive roughly $33 billion of the new SDRs - made possible by a commitment from France to reallocate their SDRs. South African President Cyril Ramaphosa has insisted in the past that a full quarter, around $162 billion, should be allocated to African nations - and called on rich countries to donate, not lend, their SDR allotments.