U.S. Opposition Stalling IMF Liquidity Boost
U.S. opposition is predicted to prevent the International Monetary Fund this week from deploying one of its strongest tools to fight the coronavirus: creating a new provision of Special Drawing Rights.
The step, akin to central bank “printing” new cash, has been advocated by economists, finance ministers, and non-profit teams to supply as much as $500 billion in urgently-needed liquidity for the IMF’s 189 member nations.
SDRs, based on dollars, euro, yen, sterling, and yuan, are the IMF’s official unit of exchange.
The IMF last approved a $250-billion new allocation of SDRs in 2009, over the last financial crisis, boosting liquidity for cash-strapped nations.
Doing so again now may present more flexibility to the 100 nations which have already sought IMF emergency loans and grants, and permit new lending to countries with “unsustainable” debt burdens, including Argentina.
An SDR expansion has attracted some movie star advocates, such as investor George Soros and U2 lead singer Bono’s ONE anti-poverty group, along with trade unions and faith-based teams.
Finance officers will discuss the issue throughout this week’s virtual IMF and World Bank Spring Meetings; however, a number of sources aware of the Fund’s deliberations say the U.S., the IMF’s dominant shareholder, actively opposes such a move.
The Trump administration opposes offering countries resembling Iran and China with billions of dollars in new resources with no conditions.