The UK said the G7 has agreed to support a “substantial” increase in Special Drawing Rights, an internal currency used by the International Monetary Fund.
The world’s seven largest advanced economies have agreed to support the first expansion of the International Monetary Fund’s (IMF) reserves since 2009, a step intended to help developing countries cope with the coronavirus pandemic, the Kingdom said on Friday. -United.
The UK – which chairs the Group of Seven (G7) this year – said G7 finance ministers had agreed to support a “new and significant” increase in the volume of Special Drawing Rights (SDRs), a currency internal used by the IMF.
“Today’s historic agreement between the G7 paves the way for crucial and concerted action to support the world’s low-income countries, ensuring that no country is left behind in the global economic recovery of the world. coronavirus, ”said UK Finance Minister Rishi Sunak.
The news was welcomed by IMF Managing Director Kristalina Georgieva, who said the meeting of G7 finance ministers was “productive”.
Last year, the IMF said it wanted the SDR allocation to reach the equivalent of $ 500 billion from the $ 293 billion agreed during the last expansion in 2009, just after the global financial crisis. .
This expansion was opposed by then-US President Donald Trump. Last month, US Treasury Secretary Janet Yellen said she wanted expansion, but wanted more transparency on how SDRs would be used and traded.
U.S. sources close to the G7 talks said an increase of around $ 650 billion was under discussion.
Even if Yellen gets consensus for an SDR allocation that falls below the threshold requiring US congressional approval – roughly $ 679 billion based on current exchange rates – US domestic policy is delicate.
Congressional Republicans have previously complained that the move would not target countries that need it most, but provide free cash reserves to China, Iran and other countries seen as adversaries by the Trump administration.
Senior Republican lawmaker French Hill said in a recent letter to Yellen that more SDRs “would bring unconditional cash to some of the world’s most brutal dictatorships.”
Any increase in SDRs will also need to be agreed with non-G7 countries, including China, before the IMF’s spring meeting in April.
The rating agency Fitch said that an increase in SDRs to $ 500 billion would be equivalent to 0.5% of global annual economic output and would represent 3.5% of global financial reserves.
“This will help countries cope with immediate external financial pressures, but is insufficient to alleviate the broader challenges of debt servicing,” Fitch wrote in a note to clients.
Britain’s Finance Ministry said additional SDRs would help poorer countries “pay for critical needs like vaccines and food imports, and improve buffers in emerging markets and low-income countries.”
Anti-poverty groups welcomed the move, but said more needed to be done for richer nations to share their unused SDRs with poorer ones.