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IMF governors approve US$650 Billion

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*Liberia to bag 350 Million on drawing rights

IMF Governors on Monday, August 2, approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion (about SDR 456 billion) to boost global liquidity.http://presscenter.imf.org

The money which is expected to be distributed among members’ countries through allocations will be based on their (countries) existing quotas in the IMF.

, Liberia would get US$350 based on its 0.05% quota in the Fund and its portion would be used to boost its reserve, support economic growth, and the fight against covid-19 thru vaccines.

“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis, IMF Managing Director Kristalina Georgieva said.

“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis,” she continued.

“The general allocation of SDRs will become effective on August 23, 2021. The newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund,” the IMF Managing Director added.

About US$275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.

“We will also continue to engage actively with our membership to identify viable options for voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth”, Ms. Georgieva said.

One key option is for members that have strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT). Concessional support through the PRGT is currently interest-free. The IMF is also exploring other options to help poorer and more vulnerable countries in their recovery efforts.

A new Resilience and Sustainability Trust could be considered to facilitate more resilient and sustainable growth in the medium term, a release said.

IMF Managing Director Kristalina Georgieva submitted a proposal for a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion to the Board of Governors for its approval on Friday, July 9.

The proposal made a case for an allocation of US$650 billion (about SDR 456 billion), based on an assessment of IMF member countries’ long-term global reserve needs.

It also included measures to enhance the transparency and accountability in the reporting and use of SDRs while preserving the reserve asset characteristic of the SDR.

The general allocation would help many EMDCs that are liquidity constrained smooth needed adjustment and avoid distortionary policies while providing scope for spending on crisis response and vaccines.

The proposal by the IMF Managing Director follows the Executive Board discussion of the general allocation of SDRs on June 25 and its formal support of the proposal on July 8.

On June 25, the Executive Board discussed a proposal for a historic US$650 billion general allocation of SDRs to address the long-term global need to supplement existing reserve assets.

Approval of the general allocation of SDRs requires support by members representing an 85 percent majority of the total voting power of SDR Department participants (currently all IMF members).

The Board of Governors voted on the proposal on Monday, August 2, 2021. Once approved, the allocation is expected to be implemented by end-August (during the current Eleventh Basic Period).

Liberia’s usage of fund if approve

Liberia is expected to use its portion of the money-US$350 million for three purposes: to boost up Liberia reserve. This is one of the main reasons for which the allocation has been made; to support economic growth thru major infrastructure investment t in the post COVID Era and to support Fight against COVID thru vaccinations and; to liquidate both domestic debt as a form of economic stimulus and to pay down some debt to the IMF.

The Liberian Government led by the Ministry of Finance Development Planning will also be expected to negotiate with the IMF for the usage of the money.

The funding amount would be given to the Central Bank of Liberia and the non-reserve portion on-lent to the fiscal authority.

Key dates about Liberia and the IMF

Liberia join the IMF on March 2, 1962

It has a SDR quota of 25.4 million.

Special Drawing Rights of 136.9 million.

Background

The Articles of Agreement require periodic consideration and decisions on SDR allocations or cancellations in consecutive basic periods of normally five years. The Managing Director must make a proposal to the Board of Governors no later than six months before the end of each basic period regarding a general allocation or cancellation for the next basic period if the conditions under the Articles are met. If there is no proposal for an allocation (or cancellation) at that point, the Managing Director can bring the issue of a general allocation or cancellation of SDRs before the Executive Board for further discussion, if and when appropriate, during the course of the basic period. The Board of Governors or the Executive Board may also request that the Managing Director make proposals at any time. The current Eleventh Basic Period is scheduled to end on December 31, 2021, and the Twelfth Basic Period will commence on January 1, 2022.https://thenewdawnliberia.com/liberia-to-get-us350m-imf-money/

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