On Monday, April 20, 2020, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said that the international organization needed to provide more financial resources and consider “exceptional measures” to help especially the poorest countries hit severely by the coronavirus pandemic.
The director also talked about issuing and allocation of Special Drawing Rights (SDRs) for printing new money, which was opposed by the US, while she praised those countries for helping out the IMF for funding its Relief Funds.
Exceptional Measures of the IMF
In a blog published on the IMF website, Georgieva suggested that the international organization had taken extraordinary steps to use its resources available especially for emerging markets and developing economies. As the highest fund on record, the IMF has allocated an outflow of $100 billion in recent months.
Citing the needs for the organization’s further commitment to the pandemic response, she stated, “The IMF, like our member countries, may need to venture even further outside our comfort zone to consider whether exceptional measures might be needed in this exceptional crisis.”
In her blog, Georgieva highly praised the generosity extended by Britain, Japan, Germany, the Netherlands, Singapore, and China that helped in boosting the resources available in the Catastrophe Containment and Relief Trust of the IMF. She also welcomed the promise made by countries including Japan, France, Britain, Canada, and Australia to expand the IMF’s Poverty Reduction and Growth Trust to $11.7 billion, taking the fund to about 70% of its $17 billion goals.
Moreover, she held high of those countries that pledged to help the IMF’s poorest members by providing grants to cover their debt service payments. In a joint IMF-World Bank paper published on Friday, it said that apart from the 77 poorest countries, which had received a suspension of bilateral loans and debt payment, many other groups of countries might also require debt relief fund.
US Opposed IMF’s Plans of SDRs
Earlier, the IMF had forecasted that the global economy would be sharply dropped by 3% in 2020 due to the pandemic, which would mark the deepest downturn since the Great Depression of the 1930s. Georgieva wrote in the blog, “We stand ready to deploy our full lending capacity and to mobilize all layers of the global financial safety net, including whether the use of SDRs could be more helpful.”
Nonetheless, the US government had been opposing the IMF’s policy for a possible allocation of Special Drawing Rights (SDRs), the IMF’s official unit of exchange that takes the roles of a central bank “printing” new money, to fight the pandemic worldwide.
Last week, US Treasury Secretary Steven Mnuchin had rejected IMF’s proposed move of SDR allocation, arguing that 70% of the funds created through it would instead go to G20 countries while only 3% would go to low-income countries. It was reported that the US, the IMF’s dominant shareholder, had been blocking such a move to prevent funding for Iran and China through this allocation.
Mnuchin urged the advanced economies to contribute instead to two IMF facilities that provided funds to the poorest countries and said the US government was looking forward to making a contribution. However, a Treasury official said that a US contribution to one or both of the funds would require congressional approval, and potentially new funds.
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