IMF liquidity increase of $ 650,000 million could materialize in August: US Treasury officials

By David Lauder and Andrea Shalal

WASHINGTON, April 1 (Reuters) – An increase in the International Monetary Fund’s (IMF) reserves of $ 650 billion could be distributed among member states in August, but only a small portion is likely to be converted into money for poorer nations. US Treasury Secretary said Thursday.

The Treasury Department has officially notified the US Congress that it plans to make a new contribution to the IMF’s Special Drawing Rights (SDRs) at the start of a 90-day consultation process that will end in early July, authorities told reporters at a conference.

The $ 650 billion increase in the IMF’s SDR must be approved by the 190-nation global lender’s board.

US Treasury Secretary Janet Yellen approved for the first time in late February the allocation for the SDR, which former President Donald Trump’s government had previously opposed.

Last week, IMF Managing Director Kristalina Georgieva said she would present to the board of directors a proposal to expand the SDR by $ 650 billion by June.

Some Republicans in Congress have criticized the move to provide reserves to rich countries that do not need them, as well as nations they see as opponents of the United States, including China, Russia, Iran and Venezuela. They also expressed concern about the need for more US loans so that countries could convert their SDRs into cash.

The finance ministry said only about 2% of the last SDR distribution of about $ 250 billion – made in 2009 – was exchanged for local currencies. SDRs are made up of dollars, euros, yen, British pounds and yuan.

This time, the percentage is likely to be higher, given the cost to countries of fighting the COVID-19 pandemic, although it will still be lower. About 70% of the funds will go to the G20, which has more resources and is unlikely to collect their SDRs, officials said.

According to a briefing, low-income countries would receive $ 21 billion in SDR stocks, and about $ 212 billion would go to other emerging markets and developing countries except China.

(Report by David Lauder. Edited in Spanish by Marion Giraldo)