IRELAND is eligible for €4bn in new International Monetary Fund (IMF) assets as part of a massive injection of financial assistance to help the global economy deal with the effects of the pandemic.
But the fund, which was part of Ireland’s bail-out troika during the financial crisis, wants rich countries to make its allocations available to low-income countries in a worldwide solidarity effort.
Yesterday the IMF allocated a record $650bn in new financial resources to its members, which will be distributed to 190 countries in proportion to their IMF quota.
Ireland has claim to a 0.72pc share of the assets, known as special drawing rights, meaning it is in line to get $4.68bn (€4bn) which can be added to external reserves to back borrowing or for dire financial emergencies.
The record allocation aims to address the long-term need for international reserves and to build confidence and foster resilience and stability in the global economy. It comes at a critical time as the highly contagious delta variant of coronavirus wreaks havoc in some countries and threatens to set back the world’s recovery.
IMF managing director Kristalina Georgieva is urging wealthy states to direct some of their allocation to countries lacking the means to cope with the Covid crisis and other future challenges.
The creation of the reserve assets – known as special drawing rights – is the first since 2009, just after the global financial crisis. The IMF is setting up special vehicles to assist in channeling reserves to developing countries and already has the Poverty Reduction and Growth Trust that provides concessional loans.
The fund is discussing with members the possibility of a new Resilience and Sustainability Trust, “which could use channeled SDRs to help the most vulnerable countries with structural transformation, including confronting climate-related challenges,” Ms Georgieva said. “Another possibility could be to channel SDRs to support lending by multilateral development banks.”
The reserves are allocated to all 190 fund members in proportion to their quota. Some 70pc will go to the Group of 20 largest economies, against just 3pc for low-income nations.
As a result, about $21bn will go to low-income countries and $212bn to other emerging market and developing countries, without counting China, according to US Treasury Department calculations.
“Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis,” Ms Georgieva said.
The Group of Seven advanced economies in June endorsed a plan to reallocate $100bn of new SDRs to poorer countries.
Reallocation will be crucial to help countries in Africa, for which only about $33bn is earmarked in the SDR issuance. France has committed to reallocating part of its SDRs for countries on the continent.
To support countries and help ensure transparency and accountability, the IMF said it was providing a framework for assessing the macroeconomic implications of the new allocation and how it might affect debt sustainability.
(Additional reporting by Bloomberg)