The US Treasury Department said that it is working with the International Monetary Fund (IMF) to provide a new allocation of Special Drawing Rights (SDRs) to help low-income countries battle the Covid-19 pandemic.
“An allocation of IMF Special Drawing Rights would help build reserve buffers, smooth adjustments, and mitigate the risks of economic stagnation in global growth,” Xinhua news agency quoted the Department as saying in a statement issued on Thursday.
“Importantly, it could also enhance liquidity for low-income and developing countries to facilitate their much-needed health recovery efforts,” the Department said, noting low-income and developing countries have been particularly hard hit by the pandemic.
The statement came after IMF executive directors last month had discussed a possible new SDR allocation of $650 billion to help boost global recovery from the pandemic.
“We are working with our international partners to pursue ways for advanced economies to lend a portion of their SDR allocation to support low-income countries,” the Department said.
Created by the IMF in 1969, the SDR is an international reserve asset to supplement members’ official reserves.
It can be exchanged among governments for freely usable currency in times of need.
The Treasury Department on Thursday also notified the Senate Banking Committee of its support for the proposed SDR allocation, as the US law requires that the Secretary of the Treasury consult with Congress at least 90 days prior to voting in favour of an IMF decision to allocate SDRs.
That means central banks globally would begin receiving new reserve assets from the IMF by August, Bloomberg News reported citing Treasury officials.