## How Channeling SDRs is Supporting Vulnerable Economies

_IMF Blog, October 13, 2023_

## Source details

**Canonical URL:** [How Channeling SDRs is Supporting Vulnerable Economies](https://www.imf.org/en/blogs/articles/2023/10/13/how-channeling-sdrs-is-supporting-vulnerable-economies)

## Other formats

- [Markdown version](/en/blogs/articles/2023/10/13/how-channeling-sdrs-is-supporting-vulnerable-economies/index.md)
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## Bibliographic details
- Authors: Kristalina Georgieva, Bernard Lauwers, Ceyla Pazarbasioglu
- Published: October 13, 2023

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### Overview
- 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.

### SDR channeling mechanisms and IMF lending instruments
- 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.

### Impact and key statistics
- 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.

### Challenges, outlook, and demand for support
- 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.

### Policy recommendations and next steps
- 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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## References

- [$650 billion](https://www.imf.org/en/News/Articles/2021/07/30/pr21235-imf-governors-approve-a-historic-us-650-billion-sdr-allocation-of-special-drawing-rights)
- [Poverty Reduction and Growth Trust](https://www.imf.org/en/Topics/PRGT)
- [Resilience and Sustainability Trust](https://www.imf.org/en/Topics/Resilience-and-Sustainability-Trust)
- [World Economic Outlook](https://www.imf.org/en/Publications/WEO)
- [further squeeze borrowers](https://www.imf.org/en/Publications/GFSR)
- [Annual Meetings](https://meetings.imf.org/)
- [recent
IMF podcast](https://www.imf.org/en/News/Podcasts/All-Podcasts/2021/08/23/ceyla-pazarbasioglu-on-sdrs)

_Source: https://www.imf.org/en/blogs/articles/2023/10/13/how-channeling-sdrs-is-supporting-vulnerable-economies_