NEW YORK: The International Monetary Fund is set to discuss a proposal to create a record US$650 billion of new reserves for its members on Friday, bringing the plan to increase resources for nations struggling with the pandemic’s economic and health costs one step closer to approval.
The executive board - composed of 24 individuals from IMF member countries and Managing Director Kristalina Georgieva - typically meets several times a week and will vet the specific details of the proposal. The idea isn’t expected to prove controversial within the board, which in March gave broad support to draft it, according to two people familiar with its discussions, who asked not to be identified because they’re private, report agencies.The board will likely consider the proposal on a so-called lapse-of-time basis, meaning that if there are no objections or requests from members for further meetings or formal discussions over a period of days, it will be considered approved and will advance for final approval to the board of governors - normally the finance minister or central bank head of the 190 IMF member countries.
Logistically, that step is likely to take weeks. Ms Georgieva has said that she hopes to have the process for the reserves, known as special drawing rights, or SDRs, completed by mid-August.
The IMF is preparing to give its member countries the biggest resource injection in its history to boost global liquidity and help emerging and low-income nations deal with mounting debt and the fallout from the Covid-19 pandemic.
The IMF also is looking for ways to redirect SDRs from richer nations that don’t need them to more vulnerable ones that do. That already can be done via donations to the fund’s Poverty Reduction and Growth Trust, which gives interest-free loans, but those borrowers are limited to low-income countries.
To broaden the group of nations that can benefit from redirected SDRs, the IMF is working on a trust for vulnerable low-middle-income countries and small island economies. Ms Georgieva says she hopes plans for the so-called Resilience and Stability Trust will be finalised by year-end.
The Group of Seven large advanced economies earlier this month signalled its support behind efforts to reallocate US$100 billion of the new reserves. France has committed to reallocating part of its SDRs to Africa, which is earmarked to initially receive US$33 billion of the US$650 billion. French President Emmanuel Macron in May asked other rich countries to also reallocate their expected new reserves to boost the amount going to Africa to US$100 billion. China supports the call.