Big economies agree to boost IMF funding, Georgieva says

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G20 major economies have agreed to raise International Monetary Fund reserves with a new allocation of the fund’s own special drawing rights (SDRs) currency, the IMF’s head said on Tuesday, in a potential boost for lending to poor countries.

“We finally last Friday at the G20 meeting got a green (light) to work on a new SDR allocation,” Kristalina Georgieva said during the IMF’s African Fiscal Forum, broadcast online.

“500 billion – in which each and every member of the IMF would receive its own share immediately contributing to reserves,” she said, without specifying the currency unit.

Italy, which heads the Group of 20 major economies this year, is pushing for a $500 billion issuance of SDRs as a way to provide liquidity to poor countries hit hard by the COVID-19 pandemic without increasing their debt levels.

G20 finance officials on Friday expressed broad support for boosting the IMF’s emergency reserves after new US Treasury Secretary Janet Yellen dropped the opposition of her predecessor, Steven Mnuchin.

An IMF spokesperson said the Fund was formulating an SDR allocation proposal at the G20’s request. The allocation’s size “will be based on our assessment of long-term global need to supplement existing reserve assets,” he said.

Georgieva also said the fund would look at ways of redistributing SDRs, which are supplemental foreign exchange reserve assets issued by the IMF much as a central bank prints money.

“We are also very interested to think of a way in which our wealthy members, who do not need this SDR allocation as much as the weaker members do, that they can transfer through us, on lend through us some of these SDRs,” she said.

Speaking at the same event, African Union Special Envoy for COVID-19 Tidjane Thiam urged the G20 to extend the Debt Service Suspension Initiative (DSSI), which provides payment relief to the poorest nations.

G20 leaders are widely expected to agree to extend the scheme, which currently runs until end-June; a decision is expected to be taken in April.

“(The) DSSI should be prolonged,” Thiam said. “We need a path to a sustainable debt situation, and if we do that, the money will come. I’m optimistic.”