WASHINGTON: US opposition is expected to prevent the International Monetary Fund this week from deploying one of its most powerful tools to help countries fight the coronavirus: creating a new allocation of Special Drawing Rights.
The IMF last approved a US$250-billion new allocation of SDRs in 2009, during the last financial crisis, boosting liquidity for cash-strapped countries. Finance officials will debate the issue during this week’s virtual IMF and World Bank Spring Meetings, but multiple sources familiar with the Fund’s deliberations say the United States, the IMF’s dominant shareholder, actively opposes such a move.
The US Treasury Department would prefer to see the IMF focus on using its US$1 trillion in existing resources, including US$100 billion in emergency loans and grants, to aid countries’ health responses to the crisis, the sources said. Such a deal to “lend” existing SDRs is more likely this week, the sources familiar with the Fund’s deliberations said.
On Tuesday, the IMF said the recession sparked by the virus would be far deeper than the Great Recession of 2008 and 2009, shrinking the global economy by 3% in 2020.French Finance Minister Bruno Le Maire argued in favor of a new SDR allocation of about US$500 billion, saying in a statement to the IMF’s steering committee it would provide an extra US$16 billion to low-income nations.
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