Ireland rejects call to share new IMF assets with developing world

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The government chose to keep the 4 billion euros in additional reserves it received from the International Monetary Fund (IMF) instead of giving them to the poorest countries as requested, the finance ministry confirmed.

n On Monday, the IMF released its largest allocation of “Special Drawing Rights” (SDRs) worth $ 650 billion (553 billion euros) as part of a massive injection of financial assistance for help the global economy cope with the effects of the pandemic.

The bulk – $ 375 billion – ended up in the external reserves of its wealthier member states, like Ireland, in proportion to their quotas in the fund.

But Kristalina Georgieva, the fund’s managing director, who was part of Ireland’s bailout troika during the financial crisis, wants these rich countries to send their allocations low.
income country in an effort of global economic solidarity.

However, Finance Minister Paschal Donohoe, who represents Ireland at the IMF, instead decided to keep the SDRs at the Central Bank and manage them as part of the country’s external reserves – although a future redistribution is not expected. excluded.

Irish SDR holdings are now almost six times larger as a result of the allocation.

“Ireland welcomes the new general allocation of SDRs which will help meet the long-term global need to top up reserves, improve global liquidity and support the global recovery,” a spokesperson for the ministry said. finances.

“As a fully engaged member of the IMF, Ireland supports efforts to help vulnerable countries, including through the beneficial use of fund resources.

“However, like many other countries, we are awaiting further details on the IMF’s proposals to redirect newly allocated SDRs to low-income and vulnerable countries.

“We will analyze the options in due course, taking due account of the EU legal framework and a thorough assessment of the
and the risk characteristics of each option.

The creation of reserve assets is the first since 2009, just after the global financial crisis.

SDRs are not money as such, but act as a claim on foreign currency and can facilitate vital imports or loan arrears for vulnerable countries in a fiscal emergency.

The IMF is setting up special vehicles to help channel reserves to developing countries and already has the Poverty Reduction and Growth Fund which provides concessional loans, he said in a statement on Monday.

France has already pledged to divert some of its SDRs to Africa, which received just $ 33 billion from the last SDR distribution, and the G7 countries announced in June that they would put 100 billion dollars available to developing countries.

Since SDRs are governed by complex rules that make direct transfers unmanageable, rich countries are more likely to lend zero-rated IOUs, providing some kind of free collateral to countries in need.

Some social justice activists have criticized the record-breaking allowance, saying it reveals a
the unfairness of the IMF structure.

“These upside-down allocations benefit the richest the most, forcing low-income countries to resort to the cap for reallocation,” said Daniel Willis, campaign and policy manager at UK charity Global Justice Now.

“Even when some of the windfall is shared, it risks exacerbating the debt burden of low-income countries.”


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