KINGSTON, Jamaica – International Monetary Fund (IMF) Caribbean member countries could benefit from as much as US$2.4 billion in additional liquidity support, under the entity’s newly proposed US$650-billion Special Drawing Rights (SDR) allocation.
Acting Director of the IMF’s Western Hemisphere Department, Nigel ChalkThe overall provision is intended to aid in the global recovery from the economic fallout resulting from the coronavirus (COVID-19) pandemic, by supplementing the reserve assets of the IMF’s 190-member countries.
During a webinar on Thursday, entitled ‘Reimagining Caribbean Economies in the Wake of the COVID-19 Pandemic’, Acting Director of the IMF’s Western Hemisphere Department, Nigel Chalk said the proposal is expected to be discussed by the Fund’s Executive Board on June 25.
Once approved, he said, it will be relayed to the Board of Governors for ratification.
Chalk said that if the submission secures 85 per cent of the members’ votes, “this allocation becomes effective by the end of August”.
The event formed part of the itinerary for the Caribbean Development Bank’s 51st Annual Meeting, from June 15 to July 1.
Chalk explained that allocations under the proposed SDR provision would be distributed according to each IMF member country’s quota share, noting that in the Caribbean’s case, “this would equate to approximately US$2.4 billion”.
“Members with liquidity constraints will be able to use this allocation to smooth the needed adjustment and avoid distortionary policies, and it would provide scope for spending on crisis, response and resiliency efforts. Once approved, this allocation will address the long-term global need to supplement existing reserve assets,” he said.
Additionally, the IMF official said, the provision would help instill global confidence, “while sending a powerful signal of a cooperative multilateral response”.
Under the IMF’s Articles of Agreement, the Managing Director may make a proposal of an SDR allocation.
This is if he/she is satisfied that the provision would help in fulfilling a long-term global need to supplement existing reserve assets in a manner that will avoid stagnation and deflation as well as excess demand and inflation, and once there is broad support among IMF members for the allocation.
Once the Managing Director’s proposal is endorsed by the Executive Board, it would be submitted to the Board of Governors, whose decision to approve an SDR allocation would require 85 per cent voting support by members.
Chalk also advised that countries with strong external positions would be encouraged to reallocate part of their holdings on a voluntary basis for the benefit of more vulnerable countries.
