By John Ikani
Nigeria and other developing countries will receive $275 billion out of the $650 billion worth of Special Drawing Rights (SDRs) as the International Monetary Fund (IMF) began the distribution of the funds on Monday.
IMF’s managing Director, Ms Kristalina Georgieva, said this in a statement on Monday, in Washington DC, while announcing the commencement of the distribution of the SDRs.
According to her, of the $275 billion, low-income countries will receive about $21 billion dollars, which is equivalent to as much as six per cent of Gross Domestic Product (GDP) in some cases.
She described the SDR allocation as a critical component of the IMF’s broader effort to support countries through the pandemic, which includes: $117 billion dollars in new financing for 85 countries.
Others are debt service relief for 29 low-income countries and policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery.
Described as the largest allocation of SDRs in history, Georgieva said that the $650 billion dollars allocation was a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat the unprecedented crisis.
“The SDR allocation will provide additional liquidity to the global economic system by supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt.
“Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis.
“SDRs are a precious resource and the decision on how best to use them rests with our member countries. For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well-informed,” the IMF managing director said.
The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries.
The SDR is not a currency, but a potential claim on the freely usable currencies of IMF members and as such could provide a country with liquidity.