More reports on: World economy
IMF allocates $250 billion in SDRs to members news
31 August 2009

The International Monetary Fund (IMF) has injected Special Drawing Rights (SDRs) equivalent to $250 billion into the recession hit global economy on Friday, in order to bolster the reserves of its member nations to tide over the financial crisis.

Earlier this month, IMF governors approved the SDR allocation to provide liquidity in the global economic system, following a call given by the G20 industrial and emerging countries during their London summit in April. (See: IMF governors approve $250 billion SDR allocations)

As announced earlier, the $250 billion allocation was made on 28 August, which will be followed by the smaller, special one-time SDR allocation of $33 billion on 9 September, totaling $283 billion. Accordingly, the total outstanding SDRs including the fund's earlier distribution will reach approximately $316 billion.

While allocation of SDR increases the international reserves held by each IMF member, it will not increase the Fund's resources available for lending. It will, however, provide members with an additional method to obtain hard currencies.

The Fund stated that about $110 billion of the combined allocations will go to emerging market and developing countries, including over $20 billion to low-income countries.

IMF's external relations director Caroline Atkinson said: ''The general SDR allocation is a key part of our response to the global crisis, demonstrating the value of a cooperative multilateral approach. The Fund's low-income members will benefit significantly.''

The Fund expects that despite a smaller number of SDRs going to the IMF's low-income members, the allocation will result-in most cases-in a proportionately bigger increase in reserves for them than it will for the advanced economies, which already have a substantial cushion of reserves.

The SDR introduced by the IMF in 1969 is an interest-bearing international reserve asset which can be exchanged for freely usable currencies. Its value is based on a basket of four key international currencies, currently: US dollar, euro, Japanese yen and pound sterling. The currency basket and weight of each currency are reviewed every five years. (1 SDR=$1.56392 as on 28 August 2009).

In order to accommodate the expected increase in the volume of SDR transactions, the IMF has called for expanding the capacity of voluntary trading arrangements under which, individual Fund members stand ready to buy and sell SDRs within certain limits, thereby effectively establishing an SDR market. The IMF acts as a broker and arranges transactions between prospective buyers and sellers of SDRs at no cost.

SDR allocations to members are made in proportion to their existing quotas in the Fund, based on their relative size in the global economy.

The US will get the maximum benefit with $47.6 billion, followed by Japan, $17.9 billion and Germany around $17 billion.

India's share of general and special SDRs comes to around $5.1 billion. China gets $10.6 billion whereas shares of other neighbouring countries are: Pakistan-$819 million, Bangladesh-$463 million, Sri Lanka-$325 million, Nepal-$60 million and Bhutan-$6 million. 

SDR allocations of top 20 nations comprise more than 70 per cent of the total allocation of $283 billion.

Top 20 SDR allocations

Member Country

General SDR ($ million)

Special SDR ($ million)

Total($ million)

1

United States

43,069

4,499

47,569

2

Japan

15,434

2,384

17,818

3

Germany

15,081

1,885

16,966

4

France

12,450

1,711

14,160

5

United Kingdom

12,450

408

12,857

6

China

9,379

1,182

10,561

7

Saudi Arabia

8,099

2,046

10,145

8

Italy

8,180

1,006

9,186

9

Russia

6,893

1,977

8,870

10

Canada

7,384

762

8,146

11

Netherlands

5,985

750

6,735

12

Belgium

5,339

663

6,002

13

India

4,821

336

5,156

14

Switzerland

4,010

1,133

5,142

15

Australia

3,752

334

4,086

16

Mexico

3,655

350

4,006

17

Spain

3,535

420

3,955

18

Brazil

3,520

434

3,954

19

Korea

3,394

253

3,646

20

Venezuela

3,083

399

3,482

Total

202,443


 search domain-b
  go
 
IMF allocates $250 billion in SDRs to members