Zim gets US$1bn IMF windfall

…As largest SDR allocation comes into effect

BUSINESS REPORTER

Zimbabwe has received about US$1bn from the International Monetary Fund (IMF) as the largest allocation of Special Drawing Rights (SDR) came into effect Monday amid calls for countries to use the resources to support their economies.

Last month, the IMF board approved the allocation of about US$650bn to bolster economies ravaged by the Covid-19 pandemic.

An SDR allocation is a way of supplementing Fund member countries’ foreign exchange reserves, allowing members to reduce their reliance on more expensive domestic or external debt for building reserves

The SDR is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries. The SDR is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro, pound sterling and Chinese Renminbi. It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members.

IMF managing director Kristalina Georgieva said Monday 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 and external debt.

“Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis,” said.

She said SDRs are a special resource and the decision on how best to use them rests with our member countries. Georgieva

“For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well-informed,” Georgieva said.

Finance and Economic Development minister Mthuli Ncube told Parliament last month that the SDRs will be allocated in areas such as health sector infrastructure and hospital equipment, education, purchasing additional vaccines, horticulture sector revolving fund, bolster forex reserves and support to industry among others.

The SDR allocation comes at time companies have been struggling to access the forex allotted at the foreign currency auction amid indications the backlog runs into two month.

IMF has allocated a total of SDR 204.2bn (equivalent to about US$318bn ), including three general allocations and a one-time special allocation.

The general allocations are SDR 9.3bn was allocated in yearly installments in 1970 to 72, SDR 12.1bn was allocated in yearly installments in 1979 to 81 and SDR 161.2bn was allocated on August 28, 2009. A special one-time allocation of SDR 21.5bn took effect on September 9, 2009 to correct for the fact that members that had joined the IMF after 1981 had never received an allocation.

 

Related Articles

Leave a Reply

Back to top button