WASHINGTON, Aug 14 – The International Monetary Fund said Thursday it would soon inject 250 billion dollars into member nations\’ coffers to cushion the blows of the global economic crisis.
Employing a rarely used tool, the IMF said its board of governors approved the allocation to its 186 members "to provide liquidity to the global economic system by supplementing fund\’s member countries\’ foreign exchange reserves."
The action is part of a 1.1 trillion dollar plan agreed by Group of 20 leaders in early April to tackle the global financial and economic crisis. The G20 also planned to triple IMF resources to 750 billion dollars.
"The general SDR allocation is a key example of a cooperative multilateral response to the global crisis, offering significant support to the fund\’s members in this challenging period," the IMF said.
The board of governors, representing all members, approved the plan to allocate Special Drawing Rights (SDRs) equivalent to 250 billion dollars, by far the largest general SDR allocation in the institution\’s six-decade history.
The disbursement takes effect on August 28.
An SDR is an interest-bearing IMF asset based on a basket of international currencies — the dollar, yen, euro and pound — that is calculated daily and which members can convert into other currencies.
The IMF has explained that some members may choose to sell part or all of their allocations to other members in exchange for hard currency — for example, to meet balance of payments needs — while other members may choose to buy more SDRs as a means of reallocating their forex reserves.
The global economy is beginning to pull out of the worst recession since World War II, the IMF says, but it expects recovery will be sluggish and financial systems remain fragile.
The board of governors approved the special SDR allocation on August 7, following its July 17 endorsement by the executive board.
The operation will increase each member country\’s allocation of SDRs by roughly 74 percent of its quota in the fund, which is broadly based on the member\’s relative size in the global economy.
The distribution dwarfs the total 21.4 billion SDRs (33 billion dollars) allocated in yearly installments through two previous general allocations: 9.3 billion SDRs in 1970-1972 and 12.1 billion in 1979-1981.
The IMF also announced a special SDR allocation of 33 billion dollars would be made on September 9.
The special allocation was authorized by an amendment to the IMF Articles of Agreement proposed in September 2007. On August 5 the United States joined 133 other members in supporting the amendment, meeting the majority threshold.
"The special allocation will make the allocation of SDRs more equitable and correct for the fact that countries that joined the fund after 1981 — more than one fifth of the current IMF membership — had never received an SDR allocation," it said.
Thirty-nine countries have joined the IMF after 1981, including Russia, the former Soviet bloc countries and Switzerland.
The largest of the new SDR allocations will go to the most advanced economies because of their relatively heavier quotas. The United States, the biggest stakeholder, will get a combined SDR allocation of 30.4 million SDRs, or roughly 47.3 billion dollars.
The IMF underscored that "nearly 100 billion dollars of the general allocation will go to emerging markets and developing countries, of which low-income countries will receive over 18 billion dollars."
The general and special allocations will bring the members\’ total to 204 billion SDRs, about 316 billion dollars.