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IMF Allocates SDRs Worth US$ 737.6 Million to Kenya

Jackson OkothbyJackson Okoth
August 25, 2021
in Global News, Kenyan News, Public Policy
Reading Time: 4 mins read

International Monetary Fund(IMF) has allocated US$ 737.6 Million worth of special drawing rights (SDRs) to Kenya.

This follows an announcement this week by the Fund of $650 Billion, its largest allocation of special drawing rights in history, which makes part of its intervention to combat the COVID-19 crisis.

Some of the Sub-Saharan Africa that will receive allocations include Angola(US$ 1.006 Billion), Ghana( US$1.003Billion), Nigeria( US$ 3.3 Billion), Senegal(US$ 440 Million) South Africa(US$ 4.1Billion), Liberia(US$ 351 Million), Rwanda( US$ 218 Million), Tanzania(US$ 541 Million), Ethiopia( US$ 409 Million), Burkina Faso(US$ 164 Million) and Cote d’Ivoire( US$884 Million)

The IMF will allocate a total of US$275 Billion to emerging and developing countries, of which low-income countries will receive about US$21 Billion – equivalent to as much as 6 per cent of GDP in some cases.

IMF computation of SDR

SDRs are being distributed to countries in proportion to their quota shares in the IMF.

The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries.

It is not a currency but a potential claim on the freely usable currencies of IMF members.

As such, SDRs can provide a country with liquidity.

According to Ms Kristalina Georgieva, Managing Director of the IMF, this allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis.

The SDR allocation will provide additional liquidity to the global economic system, 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,” said Ms Georgieva.

To support countries and help ensure transparency and accountability, the IMF provides a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability.

The IMF will also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years.

Over the past 16 months, some members have already pledged to lend US$24Billion, including US$15 Billion from their existing SDRs, to the IMF’s Poverty Reduction and Growth Trust, which provides concessional loans to low-income countries.

The IMF is also engaging with its member countries on the possibility of a new Resilience and Sustainability Trust, which could use channelled SDRs to help the most vulnerable countries with structural transformation, including confronting climate-related challenges.

Another possibility could be to channel SDRs to support lending by multilateral development banks.

This SDR allocation is a critical component of the IMF’s broader effort to support countries through the pandemic, which includes: US$117 Billion in new financing for 85 countries; 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.

ALSO READ: IMF Approves $650 Billion SDR Allocation of Special Drawing Rights


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