The International Monetary Fund (IMF) wants to increase the emergency reserves of member countries by 650 billion dollars. This should, in particular, give poorer countries and emerging economies the necessary financial breathing space to combat the coronavirus pandemic and its economic consequences.
IMF top woman Kristalina Georgieva will present a formal proposal for the reserves in June. This is done by creating additional Special Drawing Rights (SDRs), the value of which is based on a basket of five widely used currencies. Countries can use this to replenish their international reserves and sell them, for example, for euros or dollars if state finances so require.
The last time the IMF created additional emergency reserves was in 2009, due to the global financial crisis. At that time, member states of the fund agreed to the distribution of SDRs worth USD 250 billion.
If member states were to agree to Georgieva’s proposal, that would be a major step. To date, including the 2009 STEP, the IMF has created and distributed the equivalent of $ 293 billion in additional SDRs. According to the Bulgarian side, the step is an excellent opportunity to give countries that are financially constrained by the coronavirus crisis a “liquidity boost” without incurring their debts.
Georgieva had long argued for the distribution of new emergency reserves, but members of IMF have to agree. The United States opposes such a move under former President Donald Trump. The Biden government is more positive. For example, current Finance minister Janet Yellen said that such a step would also be in the national interest of the Americans, because the rapid economic recovery of poor countries also benefits the US.