By David Lawder and Andrea Shalal
WASHINGTON, Apr 1 (Reuters) – A $ 650 billion increase in International Monetary Fund (IMF) reserves could be distributed to member countries in August, but only a small proportion is likely to be converted to cash for the poorer nations, US Treasury officials said Thursday.
The Treasury Department has officially notified the US Congress that it plans a new contribution to the IMF’s Special Drawing Rights (SDR), at the beginning of a 90-day consultation process that will end in early July, authorities told reporters in a conference.
The $ 650 billion increase in the IMF’s SDRs must be approved by the global lender’s board of governors, made up of 190 member countries.
The Secretary of the Treasury of the United States, Janet Yellen, endorsed at the end of February for the first time the allocation to the SDR, to which the government of former President Donald Trump previously opposed.
Last week, IMF Managing Director Kristalina Georgieva said she would present a proposal to expand the SDRs by $ 650 billion by June to the board of directors.
Some Republicans in Congress have criticized the move to provide reserves to rich countries that don’t need them, as well as nations they see as adversaries of the United States, including China, Russia, Iran and Venezuela. They have also raised concerns about the need for more US loans to allow countries to convert their SDRs into cash.
Treasury officials said only about 2% of the last SDR allocation of roughly $ 250 billion – made in 2009 – was exchanged for local currencies. SDRs are made up of dollars, euros, yen, British pounds, and yuan.
This time, the percentage is likely to be higher, given countries’ spending needs to combat the COVID-19 pandemic, although it would still be lower. About 70% of the allocation will go to the G-20 countries, which have more resources and are seen as unlikely to collect their SDRs, officials said.
According to a Treasury briefing, low-income countries would get $ 21 billion in SDR reserves, and about $ 212 billion would go to other emerging markets and developing countries except China.
(Reporting by David Lawder. Edited in Spanish by Marion Giraldo)