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Yellen says new IMF SDR allocation not appropriate at this time

Yellen says new IMF SDR allocation not appropriate at this time
© Reuters. FILE PHOTO: U.S. Treasury Secretary Janet Yellen holds a news conference in the Cash Room at the U.S. Treasury Department in Washington, U.S. July 28, 2022. REUTERS/Jonathan Ernst/File Photo

By Andrea Shalal and David Lawder

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen on Friday said she does not see another allocation of International Monetary Fund emergency reserves to member countries as appropriate at this time, when more existing reserves need to be channeled to poorer countries.

Yellen told a news conference that the Treasury has asked the U.S. Congress for permission to lend $21 billion in existing U.S. Special Drawing Rights (SDR) to IMF trust funds for low- and middle-income countries, and was hoping for approval.

The United States is the largest shareholder in the IMF, so its support for another SDR allocation would be crucial.

The IMF in August 2021 created and issued $650 billion in SDR assets to member countries to aid their recovery from the COVID-19 pandemic, but poor countries are clamoring for more funds due to high inflation and a mounting debt crisis.

Civil society groups and lawmakers have urged the global lender to issue another $650 billion in SDRs – something akin to a central bank printing money – to help member countries grapple with overlapping health, food, energy and inflation crises.

Experts say it would be difficult to win the 85% approval needed for another allocation given deep frustration that the Group of 20 major economies had not yet met their commitment to recycle $100 billion of their SDRs from the last one.

Yellen echoed that point, and said the United States was looking at other ways to help boost funding available to needy countries, including through grants to food security organizations and debt restructuring efforts.

The non-partisan One Campaign, which tracks SDR pledges, said only $60 billion in pledges had been made thus far, with several countries – including Ireland, Norway, Switzerland and Sweden – having failed to make any pledges.

That would amount to just over $80 billion including the U.S. pledges, but One said it did not expect congressional approval for that move to come any time soon.

Source: Investing.com

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