What the IMF’s plan to disburse $650bn in special drawing rights means for poor countries

THE IMFIMFIMFSDRSDRSDR has not exactly stood on the sidelines during the covid-19 pandemic. Since the onset of the crisis, it has extended loans worth about $130bn to 85 countries and provided debt-service relief to some poor economies. Yet given the severity of the pandemic and the ’s ample balance-sheet—its lending capacity was boosted to a cool $1trn after the global financial crisis—you might have expected more. On July 8th the fund took what looks like a big step in the right direction, by deciding to create $650bn in new foreign-exchange reserves. How generous is it really?The plan does not involve direct lending to countries, nor draw on the ’s balance-sheet. It instead entails the creation and allocation of “special drawing rights” (s), a quasi-currency created in the 1960s in an effort to boost the supply of high-quality reserve assets such as dollars and gold. s are valued against a basket of several major currencies and can be swapped for those currencies if the need arises. There are no conditions attached to the use of such funds, and the associated interest rate is minimal. Governments pay 0.05% on the s they use, with no deadline by which the funds must be repaid.