• IMF approved a general allocation of SDRs equivalent to US$650 billion to boost global liquidity.
• The funds are meant to help developing countries that have struggled to cope with the impact of the pandemic on their economies.
• Zambia is expected to receive US$ 1.3 billion to ease its economic stress.
Policy Monitoring and Research Centre (PMRC) says International Monetary Fund (IMF)’s move to allocate US$ 1.3 billion as part of the Special Drawing Rights (SDRs) to Zambia will help Government improve the post COVID-19 economic recovery prospects.
Organization Executive Director Bernadette Zulu told Money FM News in a statement that the injection comes at a time when Zambia’s international reserves have increased to approximately US$1.4 billion, representing 3.5 months of import cover.
“Zambia is expected to receive US$ 1.3 billion to ease its economic stress, which has been brought about by the pandemic. It should be noted that this injection to the Zambian economy comes before a possible IMF bailout which is currently still under advanced negotiation,” Mrs. Zulu stated.
She added that it is anticipated that a stimulus of US$ 1.3 billion will improve international confidence in the country’s economy and thereby trigger local and international investments.
“Given that the SDRs will be allocated in proportion to IMF member countries existing quotas in the Fund, wealthier countries are expected to receive more. However, developing countries will need more aid to get beyond this crisis. Therefore, the reallocation of this fund could be crucial in assisting African countries such as Zambia in building more resilience in the economy as well as stabilize its macroeconomic environment.”
“The reallocated funding could then be used to fund vaccine efforts as African countries seek to protect their populations against COVID-19 and its variants while rebuilding their economies. The financial resources that are being made available will ultimately enable Zambia along with world economies to eradicate the virus and return to pre-pandemic growth paths,” she said.
On 2nd August 2021, IMF approved a general allocation of Special Drawing Rights (SDRs) equivalent to US$650 billion to boost global liquidity, and will become effective on 23rd August 2021.It will be credited to IMF member countries including Zambia.
According to the IMF, SDRs are “an international reserve asset created to supplement the official reserves of its member countries. The SDR is not a currency but rather a potential claim on the freely usable currencies of the IMF member countries. As such, SDRs can provide a country with liquidity. The value of an SDR is based on a basket of the world’s five leading currencies “the US dollar, Euro, Yuan, Yen and the UK pound.”