The U.S. Treasury Department has notified Congress of its plans to support a $650 billion issuance of International Monetary Fund Special Drawing Rights, drawing a clearer picture of when countries may receive the liquidity support.
Before a new issuance of SDRs can be approved, the United States has to go through a 90-day congressional notification process. The clock has started ticking as of Thursday, according to news reports.
There has been some vocal Republican opposition to a new issuance of SDRs, and the Treasury Department responded to some common concerns in an SDR fact sheet released Thursday. While Congress must be notified, under the law it doesn’t need to sign off on a new issuance for the administration to proceed.
Why it matters: It is not a surprise that President Joe Biden’s administration is supporting a new issuance, given the series of official statements on the matter since February. But the notification makes it official and paves the way for the new issuance to take place this summer — likely in August.
Special Drawing Rights have been a key part of the discourse on how the international community can address liquidity challenges amid COVID-19. This video explains what they are.
SDRs are seen as a critical tool to help low- and middle-income countries access critical liquidity so they can respond to the COVID-19 health and economic crisis. For countries with growing debt burdens, SDRs provide liquidity without additional borrowing.
What’s next: IMF’s board is expected to discuss SDRs at a meeting next week, and more details may emerge about the scope and timing of a new issuance. Future discussions are expected to cover SDR transparency and plans for how high-income nations can share or lend their SDRs to lower-income countries.