How the world can make the most of new special drawing rights

IMF Blog, August 23, 2021

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IMF member countries start receiving their shares of the new $650 billion special drawing rights allocation—the largest in the Fund’s history.
This injection of fresh international reserve assets is intended to bolster confidence and global economic resilience amid the Covid-19 pandemic.
Historical precedent: In 2009, during the global financial crisis, a $250 billion SDR allocation helped to restore market confidence.

Reduce reliance on more expensive domestic or external debt for countries with weak reserves.
Provide additional resources for states to increase social spending, invest in recovery, and deal with climate threats.
Direct support to vulnerable countries to fight the virus and its variants, when combined with grants and other international support, aiding the goal of:
- vaccinating at least 40 percent of the population in every country by the end of 2021, and
- vaccinating at least 60 percent by the first half of 2022.

SDRs should be used as effectively as possible—with accountability and transparency—and with as much as possible going to countries most in need.
Decision on utilization rests with IMF member countries: they can hold SDRs as part of official reserves or convert them into US dollars, euros or other reserve currencies.
The IMF will:
- provide a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability;
- provide regular updates on all SDR transactions; and
- produce a follow-up report on SDR use in two years’ time.

Encourage voluntary channeling of SDRs from countries with strong external positions to the poorest and most vulnerable nations to magnify the impact of the allocation and reduce risks of social and economic instability.
Existing commitments and possible vehicles:
- Over the past 16 months, some better off member countries have pledged to lend a total of $24 billion, including $15 billion from existing SDRs, to the IMF’s Poverty Reduction and Growth Trust (PRGT), which provides concessional loans to low-income countries.
- The IMF is engaging on a possible new Resilience and Sustainability Trust that could use SDRs to help poor and vulnerable countries with structural transformation, including climate-related challenges.
- Channeling SDRs to support lending by multilateral development banks is another possibility.
Expectation: further support to the PRGT from the new SDRs.

SDRs are not a silver bullet; they must be part of a broader program of collective action by countries and international institutions.
Since the pandemic began, the IMF has:
- provided about $117 billion in new IMF financing to 85 countries; and
- provided debt service relief to 29 low-income nations.
The IMF has collaborated with the World Bank, World Health Organization and World Trade Organization to promote global vaccination efforts.

New SDR allocation: $650 billion
2009 SDR allocation: $250 billion
Amount going to emerging and developing countries: about $275 billion
Low-income countries receiving: about $21 billion—over 6 percent of gross domestic product in some cases
Vaccination targets supported by SDR-related support:
- at least 40 percent of the population in every country by the end of 2021
- at least 60 percent by the first half of 2022
Pledges to lend to PRGT over the past 16 months: $24 billion, including $15 billion from existing SDRs
IMF financing provided since the pandemic began: about $117 billion to 85 countries
Debt service relief beneficiaries: 29 low-income nations
Follow-up reporting: a report on SDR use in two years’ time

Source: IMF blog post “How the world can make the most of new special drawing rights” (August 23, 2021).