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US Treasury Secretary Yellen defends IMF reserve increase aimed at poor nations

IMF Managing Director Kristalina Georgieva on Tuesday stated the fund needs to increase its allocation of particular drawings rights (SDR) by $650 billion with the purpose of safeguarding the monetary well being of impoverished international locations.

Posted by Harshit Sabarwal | AFP

PUBLISHED ON MAR 24, 2021 10:38 PM IST

US Treasury Secretary Janet Yellen on Wednesday defended the IMF’s transfer to increase its reserve choices, calling the elevated help a “joint effort” to assist the poorest nations hit by Covid-19.

IMF Managing Director Kristalina Georgieva on Tuesday stated the fund needs to increase its allocation of particular drawings rights (SDR) by $650 billion with the purpose of safeguarding the monetary well being of impoverished international locations.

Yellen defended the increase in response to questions from lawmakers on the Senate Banking Committee who have been involved the money would help wealthy international locations that do not want it, together with Washington’s rivals.

“I would say that the current crisis has increased the need for global reserves, and that’s the IMF’s assessment. The global economy suffered a very severe, severe collapse in 2020,” Yellen stated in testimony alongside Federal Reserve Chair Jerome Powell.

“This allocation will help countries meet this need for reserves.”

Yellen added that many international locations intend to forgo their SDR increase in favor of poor international locations, which might amplify the influence of the brand new allocations.

Georgieva will submit her proposal to the IMF Board in June, which if accepted could be the primary SDR increase since 2009, amid the downturn brought on by the worldwide monetary disaster.

Finance ministers from the G7 richest international locations, together with the United States, agreed final week to assist the IMF transfer.

SDRs, created by the International Monetary Fund in 1969, play an influential position in international finance and assist governments defend their monetary reserves in opposition to international foreign money fluctuations.

It can be used as the idea of loans from the IMF’s essential crisis-lending services.

While not a real foreign money itself — there are not any SDR cash or banknotes — the IMF makes use of it to calculate its loans to needy international locations, and to set the rates of interest on these loans.

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