By BUUMBA CHIMBULU
A PROPOSAL for a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion to the board of governors for approval has been submitted by the International Monetary Fund (IMF) Managing Director Kristalina Georgieva.
This is meant to enable member countries, such as Zambia, with strong economic fundamentals to divert reserves to low-income and vulnerable countries.
Once approved, the development spells hope for an opportunity to shore up decade low foreign exchange reserves for Zambia.
The proposal follows the Executive Board discussion of the general allocation of SDRs on June 25 and its formal support of the proposal on July 8, 2021.
According to a statement from the IMF, the Board of Governors was scheduled to vote on the proposal by August 2, 2021.
“Approval of the general allocation of SDRs requires support by members representing an 85 percent majority of the total voting power of SDR Department participants (currently all IMF members).
“Once approved, the allocation is expected to be implemented by end-August (during the current Eleventh Basic Period),” the statement indicated.
Against this background, in a separate report to the Board of Governors, the Managing Director indicated that she was not proposing an additional allocation at this point for the next Twelfth Basic Period covering from January 2022 to December 2026.
The current Eleventh Basic Period is scheduled to end on December 31, 2021 and the Twelfth Basic Period will commence on January 1, 2022.
The Articles of Agreement require periodic consideration and decisions on SDR allocations or cancellations in consecutive basic periods of normally five years.
According to the background of the SDRs, the Managing Director must make a proposal to the Board of Governors no later than six months before the end of each basic period regarding a general allocation or cancellation for the next basic period if the conditions under the Articles are met.
If there is no proposal for an allocation (or cancellation) at that point, the Managing Director can bring the issue of a general allocation or cancellation of SDRs before the Executive Board for further discussion, if and when appropriate, during the course of the basic period.
The Board of Governors or the Executive Board may also request that the Managing Director make proposals at any time.