December 10, 2021
On August 23, 2021, the International Monetary Fund (IMF) allocated $650 billion worth of Special Drawing Rights (SDRs) to its members to add liquidity to the global economy during the unprecedented health and economic crises caused by COVID-19. SDRs, which are an international reserve asset, can be exchanged for hard currency or donated among member countries, meaning the injection by the IMF can be used by governments to stabilize their currencies and shore up their reserves, or for a number of social or health policies — the latter being an especially important use for SDRs during the pandemic, as IMF Managing Director Kristalina Georgieva has said.
As a reminder, not all uses of SDRs involve operations at the SDR Department that modify member countries’ SDR holdings; some are domestic operations leveraged on SDR holdings. And simply having SDRs increase central bank reserves also improves a country’s financial position.
Shortly after the new allocation of SDRs in August 2021, we reported how countries were using them after the first week; later, we reported on countries’ use of SDRs during the month of September. The report for October includes data that compares the first three months of this SDR allocation with the 2009 allocation.
The $650 billion allocation of SDRs continues to be an example of international cooperation leading to a concrete success. Several recent initiatives have sought to build on this success. In November, the chairs of the Congressional Progressive Caucus, the Black Caucus, the Hispanic Caucus, and the Asian Pacific American Caucus urged US Treasury Secretary Janet Yellen to back the issuance of $2 trillion more SDRs in a new allocation. Jubilee USA Network held a high-level panel with Africa Union Ambassador Hilda Suka-Mafudze, President of Bread for the World Reverend Eugene Cho, and Sam Brownback, former US senator, that discussed, in part, how a new allocation of SDRs can meet the continuing challenges of the pandemic.
Barbados Prime Minister Mia Mottley called for “$500 billion in SDRs annually for 20 years” — in total, 10 trillion dollars — to help vulnerable countries address the impacts of climate change.
Lastly, there are also efforts to rechannel SDRs to poorer countries from countries that do not need them. China pledged to rechannel $10 billion worth of SDRs to African countries, or about 25 percent of its recent allocation. Other commitments to rechannel SDRs include those from Canada, Italy, Spain, the United Kingdom (20 percent), Japan (10 percent), the Republic of Korea (5 percent), Belgium (4 percent), and the Netherlands (3 percent). The United States has not yet pledged a specific amount.
Key takeaways from November data:
- Paraguay, Maldives, and Moldova exchanged all, or almost all, of their SDRs for hard currency.
- Argentina made a significant payment to the IMF with the recently allocated SDRs.
- The IMF General Resources Account increased its SDR position by over $1.37 billion, with around half of this increase attributable to known payments to the IMF.
- France had a significant decline of $344 million worth of SDRs.
- The United States led the world with a purchase of $274 million worth of SDRs.
IMF Data: SDR accounts with large decreases
While reductions in countries’ SDR holdings usually imply an exchange of SDRs for hard currency, decreases in SDR holdings may also result from a payment in SDRs to the IMF for a loan or a transaction (such as a deposit) with a prescribed holder of SDRs. Countries may also lend SDRs to each other. Countries that exchange SDRs for hard currencies usually cite liquidity problems, dwindling foreign exchange reserves, and a need for more imports, as well as a desire to implement measures to address the pandemic.
There was a net total of $2.049 billion worth of SDRs exchanged in November.
$270 million decrease (100 percent reduction of its recent allocation)
On August 25, Paraguay’s parliament approved a law that transferred the SDRs from the central bank to the government budget for COVID-19 relief investments. In November, the government requested the SDR conversion into US dollars to use for fiscal spending.
$225 million decline (100 percent reduction of its recent allocation)
Moldova’s parliament approved a law that authorizes transfer of the SDRs from the central bank to the government budget. According to press reports, “Moldova will be able to use the 165.3 million Special Drawing Rights (SDRs), the equivalent of about 236 million dollars, agreed with the International Monetary Fund. The decision was approved by the Parliament on Thursday, October 14, in order to finance the budget deficit.”
$28 million decline (97 percent reduction of its recent allocation)
There is no publicly available information on how Maldives used its SDRs. However, during October, the IMF issued its staff report on the Maldives economy, warning there are downside risks due to COVID-19 effects. It appears that the SDR cash equivalents were incorporated as grants into the revised 2021 budget.
$385 million decline (9.0 percent reduction of its recent allocation)
Argentina paid part of its obligations to the IMF in November. The Argentine government used the SDRs for a complex set of operations that helped alleviate its external position marked by its IMF debt. The Argentine minister of finance has announced Argentina will pay its December obligations with the SDRs recently allocated.
Other notable accounts:
The following countries reduced their SDR holdings because of payments to the International Monetary Fund. Some countries only paid interest charges, not principal, with SDRs.
- Bangladesh. $38.8 million decline (2.7 percent reduction of its recent allocation)
- Egypt. $141 million decline (5.2 percent reduction)
- Iraq. $104 million decline (4.7 percent reduction)
- Ukraine. $62 million decline (2.3 percent reduction)
- Ecuador. $39 million decline (4.2 percent reduction)
- Pakistan. $33 million decline (1.2 percent reduction)
- Côte d’Ivoire. $24 million decline (3.8 percent reduction)
- Angola. $19 million decline (1.9 percent reduction)
- Tunisia. $13 million decline (1.8 percent reduction)
- Albania. $9 million decline (4.8 percent reduction)
- Dominica. $0.863 million decline (5.6 percent reduction)
- Samoa. $0.813 million decline (3.7 percent reduction)
The following accounts reduced their SDR holdings.
- France. $344 million decline (1.3 percent reduction of its recent allocation)
- Mexico. $138 million decline (1.2 percent reduction)
- Bank for International Settlements. $104 million decline
IMF Data: SDR accounts with large increases
These countries likely exchanged or issued hard currencies for SDRs.
- United States. $275 million increase
- The Netherlands. $225 million increase
- Israel. $83 million increase
Ukraine received a substantial disbursement for $700 million, but it did not increase its SDR holdings. Tanzania restructured its debt with the IMF: it migrated from the General Resources Account to the Poverty Relief and Growth Trust.
IMF General Resources Account
$1370 million increase in its SDR holdings in November
The IMF’s SDR holdings had a significant increase, $647 million of which were attributable to countries’ payments of past IMF debts. It is important to remember that no SDRs are allocated to the IMF; its holdings increase primarily on the basis of loan repayments.
Countries to Watch
Apart from the IMF data, reporting on — or statements from — countries may give information on the use, or future use, of SDRs. It may also highlight the domestic use of SDRs, which would not appear as transactions in the IMF data. These are countries to watch in future months.
Several countries did not exchange their SDRs, but did use them for domestic fiscal purposes.
Here are countries to watch in future months.
- Argentina will make payments to the IMF in December. There are reports that as part of a new agreement with the IMF, the IMF will disburse an amount equivalent to that paid back to the IMF throughout 2021, so as to have a net-zero SDR effect.
- Mexico announced a capital injection to Pemex, its state oil company, linked to previous announcements on foreign exchange acquired from its central bank as a result of the SDR allocation. This capital will be used for foreign debt relief, through bond repurchases (presumably below par), and restructurings.
- Sudan was blocked by the IMF from accessing approximately $150 million of its SDRs after the recent change in government. The main impact of the freeze “would be on development projects covering areas including water supply, electricity, agriculture, health and transport. An internationally funded basic income programme to lessen the impact of subsidy reform has also been frozen.”
- Democratic Republic of Congo will use half of its SDR allocation to strengthen central bank reserves and the other half to improve the quality of public investments. The DR Congo will enter a new agreement with the IMF.
- Zimbabwe. A post-2022 National Budget analysis states that out of $958 million, “Treasury has withdrawn US$311 million from the facility, with most of the funds (US$144 million) going to the rehabilitation of the Harare-Beitbridge Highway and the remainder being allocated to Covid-19 vaccination programmes (US$77 million) and agriculture social protection (US$80 million). Of the remaining amount, US$280 million has been set aside for foreign exchange reserves.”