The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries.
The SDR is not a currency. It is a potential claim on the freely usable currencies of IMF members. As such, SDRs can provide a country with liquidity.
A basket of currencies defines the SDR: the US dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound.
Since the onset of the pandemic, SDR channeling (and equivalent currency amounts) has helped many countries in need, especially those eligible for financial support from the IMF’s Poverty Reduction and Growth Trust (PRGT) and the Resilience and Sustainability Trust (RST).
Since 2020, channeling of about $56 billion is providing the PRGT with the capacity to mobilize $40 billion in interest-free loans to our poorest members through 2024. This financing helps support growth enhancing reforms in these countries. So far, these loans have benefited 57 countries and could benefit more in the years ahead.
Channeling has also supported the operations of the RST, which delivers affordable long-term financing to help vulnerable countries tackle long-term challenges including climate change. To date, 23 RST partners have channeled about $48 billion to the RST, which is expected to contribute toward meeting an estimated $29 billion in affordable financing.
After decades of increasing global economic integration, the world is facing a growing risk of geoeconomic fragmentation, with potentially far-reaching implications for the global economy and the international monetary system. Against this background, this paper studies how geopolitical proximity, along with other economic factors, affects the usage of five SDR currencies in cross-border transactions. Since World War II, the global currency landscape has remained relatively stable, with the U.S. dollar serving as the dominant currency. Using country-level SWIFT transaction data, our analysis confirms the importance of inertia, trade and financial linkages in shaping the currency landscape, consistent with existing studies. On geopolitical proximity, we find that closer proximity can boost the use of the euro and renminbi, notably among emerging market and developing economies, although the impact is rather muted in the full sample. The effect on RMB usage in the full sample is more pronounced during periods of heightened trade policy uncertainty. These findings suggest that in a more geoeconomically fragmented world, alternative currencies could play a greater role.
After four decades of high growth and remarkable socioeconomic achievements, China’s growth has decelerated in recent years, reflecting the pandemic, a large but needed property market correction, and structural headwinds such as weakening productivity and labor force growth. The transition to lower growth is consistent with the authorities’ goal to pursue high-quality growth and reduce the imbalances and vulnerabilities that have emerged, most notably with the significant build-up of debt. The authorities have taken incremental policy steps to achieve these objectives, but a comprehensive and balanced policy approach is needed to manage the challenges facing the economy.
Economic conditions have improved since the beginning of the ECF-supported program. Real GDP growth is expected to remain on an upward trajectory peaking at around 4½ percent under the program. Inflation is projected to decline further in 2024 although at a much slower pace than observed in 2023. The near completion of large public projects and the steady improvement in domestic revenue mobilization will be key driving factors for the improvement in the domestic primary balance. The external sector is stable, and gross international reserves are expected to remain above 7 months of import cover over the program period. The baseline, however, is subject to considerable uncertainty as Comoros continues to face the challenges of a small, fragile island state: significant development challenges, balance of payments needs, a high risk of debt distress, vulnerabilities in the banking system, governance and corruption vulnerabilities, and exposure to climate change risks. Tropical storms that impacted East Africa in April and May also inflicted significant damage across the country.
Despite a challenging environment, the authorities have broadly shown strong commitment to the reforms proposed in the program. Challenges to fuel and electricity supply have undermined economic growth, revenue mobilization, and government liquidity. Further, volatile spending weakened budget credibility. Public debt increased rapidly last year driven by regional issuances, and the authorities have ambitious borrowing plans for 2024. Thus, boosting revenue collection—particularly from fuel imports—and strengthening spending management will be key to preserving macroeconomic stability and debt sustainability.
GDP growth in 2023 was strong (7.3 percent), exceeding expectations for the third year in a row since the downturn in 2020. Unemployment is near pre-crisis levels while inflation has moderated. Government bond spreads increased in the second half of 2023 as markets became concerned that failure to meet the fiscal targets would lead to a loss of investment grade status. However, the overall fiscal deficit dropped from 4.0 percent of GDP in 2022 to 3.0 percent in 2023, and the Social and Fiscal Responsibility Law (SFRL) target was met. Following a Supreme Court ruling that the new contract with copper mine Minera was unconstitutional, the government ordered the closing of the mine. Banks are, on average, well capitalized and liquid, and stay broadly resilient in an adverse scenario.
After decades of increasing global economic integration, the world is facing a growing risk of geoeconomic fragmentation, with potentially far-reaching implications for the global economy and the international monetary system. Against this background, this paper studies how geopolitical proximity, along with other economic factors, affects the usage of five SDR currencies in cross-border transactions. Since World War II, the global currency landscape has remained relatively stable, with the U.S. dollar serving as the dominant currency. Using country-level SWIFT transaction data, our analysis confirms the importance of inertia, trade and financial linkages in shaping the currency landscape, consistent with existing studies. On geopolitical proximity, we find that closer proximity can boost the use of the euro and renminbi, notably among emerging market and developing economies, although the impact is rather muted in the full sample. The effect on RMB usage in the full sample is more pronounced during periods of heightened trade policy uncertainty. These findings suggest that in a more geoeconomically fragmented world, alternative currencies could play a greater role.
After four decades of high growth and remarkable socioeconomic achievements, China’s growth has decelerated in recent years, reflecting the pandemic, a large but needed property market correction, and structural headwinds such as weakening productivity and labor force growth. The transition to lower growth is consistent with the authorities’ goal to pursue high-quality growth and reduce the imbalances and vulnerabilities that have emerged, most notably with the significant build-up of debt. The authorities have taken incremental policy steps to achieve these objectives, but a comprehensive and balanced policy approach is needed to manage the challenges facing the economy.
Economic conditions have improved since the beginning of the ECF-supported program. Real GDP growth is expected to remain on an upward trajectory peaking at around 4½ percent under the program. Inflation is projected to decline further in 2024 although at a much slower pace than observed in 2023. The near completion of large public projects and the steady improvement in domestic revenue mobilization will be key driving factors for the improvement in the domestic primary balance. The external sector is stable, and gross international reserves are expected to remain above 7 months of import cover over the program period. The baseline, however, is subject to considerable uncertainty as Comoros continues to face the challenges of a small, fragile island state: significant development challenges, balance of payments needs, a high risk of debt distress, vulnerabilities in the banking system, governance and corruption vulnerabilities, and exposure to climate change risks. Tropical storms that impacted East Africa in April and May also inflicted significant damage across the country.
Despite a challenging environment, the authorities have broadly shown strong commitment to the reforms proposed in the program. Challenges to fuel and electricity supply have undermined economic growth, revenue mobilization, and government liquidity. Further, volatile spending weakened budget credibility. Public debt increased rapidly last year driven by regional issuances, and the authorities have ambitious borrowing plans for 2024. Thus, boosting revenue collection—particularly from fuel imports—and strengthening spending management will be key to preserving macroeconomic stability and debt sustainability.
GDP growth in 2023 was strong (7.3 percent), exceeding expectations for the third year in a row since the downturn in 2020. Unemployment is near pre-crisis levels while inflation has moderated. Government bond spreads increased in the second half of 2023 as markets became concerned that failure to meet the fiscal targets would lead to a loss of investment grade status. However, the overall fiscal deficit dropped from 4.0 percent of GDP in 2022 to 3.0 percent in 2023, and the Social and Fiscal Responsibility Law (SFRL) target was met. Following a Supreme Court ruling that the new contract with copper mine Minera was unconstitutional, the government ordered the closing of the mine. Banks are, on average, well capitalized and liquid, and stay broadly resilient in an adverse scenario.
