G20 finance ministers have supported a move to boost the IMF’s emergency reserves, in order to help poorer countries affected by the pandemic, without raising their debt levels.
IMF boss Kristalina Georgiev made the announcement today in a potential boost for lending to poor countries.
The plan agreed on Friday, is to raise the fund to allow a new allocation of the IMF’s own special drawing rights (SDRs) currency. It comes after US officials dropped the previous Trump administration’s opposition.
Special drawing rights are international reserve assets, created by the IMF in 1969 to supplement its member countries’ official reserves. Currently, $293bn of SDRs have been allocated to members, including $182.6bn allocated in 2009 during the global financial crisis.
Italy, which heads the G20 this year, is pushing for a $500bn issuance of SDRs, a move backed by many other G20 members as a way to provide liquidity to poor countries.
“We finally last Friday at the G20 meeting got a green (light) to work on a new SDR allocation,” Georgieva said during the IMF’s African Fiscal Forum.
“500bn – in which each and every member of the IMF would receive its own share immediately contributing to reserves,” she added.
Former CEO of Credit Suisse and the current 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 the end of June, though 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.”