The likelihood of a new issuance of International Monetary Fund Special Drawing Rights providing liquidity to low-income countries rose dramatically Thursday as the U.S. signaled its support.
In a letter to members of the G-20 group of nations, U.S. Treasury Secretary Janet Yellen said that a new allocation of SDRs could facilitate “much-needed health and economic recovery efforts” for low-income countries and that the U.S. looks forward to “discussing potential modalities for deploying SDRs.”
To make SDRs effective, she continued, the G-20 must create transparency and accountability in how they are exchanged and used. She encouraged G-20 countries to give their excess SDRs to low-income countries.
The letter also called for greater support of a rapid global vaccination program, which Yellen called “the strongest stimulus we can provide to the global economy,” and for G-20 countries to continue domestic fiscal and policy actions. Yellen wrote that the policymakers of leading economies need to support low-income countries in their pursuit of climate goals “balanced with their development objectives.”
Why it matters: With the U.S. on board, it seems likely the G-20 will support a new issuance of SDRs. During former President Donald Trump’s administration, U.S. objections were a key hurdle. There seems to be a consensus around an issuance of at least $500 billion, which the Italian presidency of the G-20 supports. But advocates have pushed for much more — $3 trillion — and G-20 leaders are likely to wait for an IMF needs assessment before making their decision, Eric LeCompte, executive director at the Jubilee USA Network, told Devex.
What’s next: While these issues are likely to come up at the G-20 meeting Friday, approval of new SDRs would come at the IMF meeting in April at the earliest.