The International Monetary Fund’s largest allocation of Special Drawing Rights of $650 billion came into effect on Monday, under which Pakistan received $2.75 billion.
The State Bank of Pakistan on Tuesday also acknowledged receiving the funds.
The IMF in a tweet broke down the value of SDRs in US dollars with names of some of the countries, including Pakistan, who have received the fund.
According to a statement issued by the IMF Managing Director Kristalina Georgieva, the allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat the unprecedented crisis.
“[The] countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis,” said the IMF MD, adding the SDR allocation will provide additional liquidity to the global economic system.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. SDRs can be exchanged for these currencies.
Under the allocation, $275 billion would go to emerging and developing countries, of which low-income countries will receive about $21 billion.
Through the SDR allocation, IMF aimed to support economies of the countries to mitigate the crisis created by Covid. So far the coronavirus has killed at least 4.44 million people and infected more than 212 million people across the globe. The pandemic has forced various countries to impose multiple forms of lockdown which has affected the economy severely.
The SDR allocation is a critical component of the IMF’s effort to support countries through the pandemic, read the press release.
The IMF MD said the decision of member countries to utilize the SDRs should be “prudent and well-informed”.
Georgieva, in a tweet, termed the allocation “pivotal moment” in fight against the pandemic. The SDRs could be used to purchase vaccine. This was briefed through a picture attached with the tweet of the IMF MD.
In end July, State Bank of Pakistan Governor Dr Reza Baqir, while announcing the Monetary Policy for the next two months had said: “In August, Pakistan’s reserve buffers are expected to rise by another $2.8bn through the IMF’s planned new global SDR allocation.”