How Channeling SDRs is Supporting Vulnerable Economies

IMF Blog, October 13, 2023

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Special drawing rights (SDRs) are the IMF’s unique international reserve assets that member countries generally hold as official reserves.
The IMF’s largest-ever allocation of SDRs injected $650 billion of reserves and liquidity into the world’s economies two years ago as they confronted the pandemic.
Advanced economies with strong external positions obtained about $350 billion of SDRs, much of which in many countries “sits 'dormant'” because they are already well protected.
Voluntary channeling from economically stronger members can direct SDRs to vulnerable low- and middle-income countries that need support most.

Two key IMF instruments receive channeled SDRs:
- Poverty Reduction and Growth Trust (PRGT) — provides interest-free loans to low-income countries.
- Resilience and Sustainability Trust (RST) — provides affordable long-term financing to address structural challenges like climate change and pandemic preparedness.
Since 2021, the Group of Twenty and other economically stronger member countries have voluntarily pledged more than $100 billion of SDRs to support vulnerable members.

Since the pandemic, the IMF has provided about $30 billion in interest-free loans to 56 low-income countries through the PRGT.
Increased PRGT support: with SDR channeling and other contributions, the IMF is in a better position to increase financial support through the PRGT to $40 billion over 2020-24—almost five times the historical average.
RST contributions and expected financing:
- Members have provided channeling and other contributions totaling $41 billion to the RST.
- The RST is expected to contribute toward meeting an estimated $29 billion in financing.

The IMF’s medium-term growth forecast is the lowest in decades amid deepening divergences.
With inflation still elevated, policy rates are poised to stay higher for longer, which will further squeeze borrowers.
Many countries continue to bear economic scars from the pandemic while confronting multiple global shocks, including food insecurity and climate change.
These conditions mean many countries will need more IMF support, not less, and adequate resourcing of the IMF is critical to meet growing needs.

Continue and scale up voluntary SDR channeling from financially stronger members to the PRGT and RST to strengthen support for vulnerable countries.
Build on existing channeling mechanisms and trust contributions to ensure the IMF can meet increased demand for concessional and long-term financing.
Maintain international solidarity: recent pledges during the Annual Meetings from several members signal support for further scaling up SDR channeling.

Source: How Channeling SDRs is Supporting Vulnerable Economies, Kristalina Georgieva, Bernard Lauwers, Ceyla Pazarbasioglu; October 13, 2023.

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