Sat, Mar 27, 2021
by Warren Coats
On March 23, the Managing Director of the International Monetary Fund, Kristalina Georgieva, reported that: “I am very encouraged by initial discussions on a possible SDR allocation of US$650 billion. By addressing the long-term global need for reserve assets, a new SDR allocation would benefit all our member countries and support the global recovery from the COVID-19 crisis.” “IMF Executive Directors discuss new SDR allocation” The SDR is the international reserve asset and unit of account created and issued by the IMF to supplement the U.S. dollar in those roles. There are important advantages to replacing or reducing the dominance of the U.S. dollar in global commerce with an internationally issued currency with a more stable value than the dollar or any other single currency. “Returning to currencies with hard anchors” Real SDR Currency Board
The IMF’s Articles of Agreement require a long-term global need for additional reserves to justify an allocation. Thus, the Managing Directors call for a new allocation is “based on an assessment of IMF member countries’ long-term global reserve needs, and consistent with the Articles of Agreement and the IMF’s mandate.” “IMF Executive Directors discuss new SDR allocation” While I think an allocation is justified and useful at this time, the underlying motivation of aiding IMF members to fight the economic impact of the Covid-19 pandemic is unfortunate.
The aid motivation is revealed in a Wall Street Journal editorial on March 24, 2021, which unfortunately misrepresents important features of the SDR. “Special dollars for dictators”
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