The board of governors of the International Monetary Foundation (IMF) has approved a general allocation of special drawing rights (SDR) equivalent to $650 billion on August 2 to boost global liquidity. Vietnam could be one of the emerging countries receiving support from this package.
“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis. The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis,” Kristalina Georgieva, IMF managing director, said.
The general allocation of SDRs will become effective on August 23. The newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the fund.
About $275 billion of the new allocation will go to emerging markets and developing countries, including low-income countries in Southeast Asia such as Vietnam, Thailand, and the Philippines.
Bloomberg predicted Vietnam could receive $1.56 billion from the IMF package.
“We will also continue to engage actively with our membership to identify viable options for voluntary channelling of SDRs from wealthier to poorer member countries to support their pandemic recovery and achieve resilient and sustainable growth,” Georgieva said.
One key option is for members with strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT). Concessional support through the PRGT is currently interest-free. The IMF is also exploring other options to help poorer and more vulnerable countries in their recovery efforts. A new Resilience and Sustainability Trust could be considered to facilitate more resilient and sustainable growth in the medium term, the IMF stated.
However, in July, the IMF forecasted lower prospects for Indonesia, Malaysia, the Philippines, Thailand, and Vietnam where recent waves of COVID-19 infections are weighing on activity. The fund forecast that emerging Asia would grow 7.5 per cent this year, down 1.1 percentage points from the April forecast, according to Reuters.