IMF Managing Director Announces the US$650 billion SDR Allocation Comes into Effect

IMF News, August 23, 2021

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The largest allocation of Special Drawing Rights (SDRs) in history—about US$650 billion—comes into effect on August 23, 2021.
The allocation is described as a significant "shot in the arm" for the world and a unique opportunity to combat the COVID-19 crisis if used wisely.

SDRs are distributed to countries in proportion to their quota shares in the IMF.
About US$275 billion is going to emerging and developing countries.
Low-income countries will receive about US$21 billion—equivalent to as much as 6 percent of GDP in some cases.
The allocation will provide additional liquidity to the global economic system, supplementing countries’ foreign exchange reserves and reducing reliance on more expensive domestic or external debt.
Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis.

The IMF will provide a framework for assessing:
- The macroeconomic implications of the new allocation,
- Its statistical treatment and governance,
- How it might affect debt sustainability.
The IMF will provide regular updates on all SDR holdings, transactions, and trading.
The IMF will publish a follow-up report on the use of SDRs in two years’ time.

The IMF is encouraging voluntary channeling of some SDRs from countries with strong external positions to countries most in need.
Over the past 16 months, some members have pledged to lend US$24bn, including US$15 billion from their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust.
- The Poverty Reduction and Growth Trust provides concessional loans to low-income countries.
The IMF states this US$24bn is "just a start" and will continue to work with members to build on this effort.

The IMF is engaging with members on the possibility of a new Resilience and Sustainability Trust, which could:
- Use channeled SDRs to help the most vulnerable countries with structural transformation,
- Include confronting climate-related challenges.
Another possibility is to channel SDRs to support lending by multilateral development banks.

This SDR allocation is listed as a critical component of the IMF’s broader effort, which also includes:
- US$117 billion in new financing for 85 countries;
- Debt service relief for 29 low-income countries;
- Policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery.

Source: Press Release No. 21/248, IMF Communications Department, August 23, 2021.