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This SDR Allocation Must Be Different

Summary:
When the International Monetary Fund announced last month a new 0 billion allocation of special drawing rights, the hope was that high-income countries would transfer their SDRs to developing countries in need. With the Fund’s annual meetings coming in October, it’s time for all parties to step up. BERKELEY – In August, the International Monetary Fund announced, to much fanfare, that its members had reached a historic agreement to issue 0 billion of special drawing rights (SDRs, the Fund’s unit of account) to meet the COVID-19 emergency. SDRs are bookkeeping claims that governments, through the IMF’s good offices, can convert into dollars and other hard currencies to pay for essential imports, such as

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When the International Monetary Fund announced last month a new $650 billion allocation of special drawing rights, the hope was that high-income countries would transfer their SDRs to developing countries in need. With the Fund’s annual meetings coming in October, it’s time for all parties to step up.

BERKELEY – In August, the International Monetary Fund announced, to much fanfare, that its members had reached a historic agreement to issue $650 billion of special drawing rights (SDRs, the Fund’s unit of account) to meet the COVID-19 emergency. SDRs are bookkeeping claims that governments, through the IMF’s good offices, can convert into dollars and other hard currencies to pay for essential imports, such as vaccines. And $650 billion isn’t peanuts: it’s nearly 1% of global GDP. This could make a big difference for poor countries impacted by the virus.

The problem is that SDRs are allocated according to countries’ quotas, or automatic borrowing rights, within the IMF, and the quota formula depends heavily on...

Barry Eichengreen
Barry Eichengreen is Professor of Economics at the University of California, Berkeley; Pitt Professor of American History and Institutions at the University of Cambridge; and a former senior policy adviser at the International Monetary Fund.

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