Ghana to get nearly $1bn in Special Drawing Rights from IMF
Ghana will be able to withdraw almost $1 billion in Special Drawing Rights (SDRs) from the International Monetary Fund (IMF) starting August 23, 2021, according to the IMF.
This was revealed in IMF email exchanges to JoyBusiness.
The explanation follows the IMF Board’s approval of a broad distribution of SDRs to bolster global liquidity on August 2.
On August 23, 2021, the general allotment of SDRs will take effect.
The newly generated SDRs will be credited to IMF members in accordance to their current quotas.
The increased allocation will go to emerging markets and developing nations, particularly low-income countries, for roughly US$275 billion (SDR193 billion).
What are Special Drawing Rights (SDRs)?
According to the IMF, this action guarantees that its members, including Ghana, have a strong external position to freely channel a portion of their SDRs to the IMF’s Poverty Reduction and Growth Trust to increase financing to low-income countries (PRGT).
The SDR is an international reserve asset developed by the International Monetary Fund (IMF) in 1969 to complement the official reserves of its member countries. A total of SDR 660.7 billion (about US$943 billion) has been awarded to date.
On August 2, 2021, the largest-ever grant of approximately SDR 456 billion was authorized (effective on August 23, 2021). This most recent allocation was made to meet the long-term global demand for reserves and to assist nations in dealing with the COVID-19 epidemic.
The SDR’s value is determined by a basket of five currencies: the US dollar, euro, Chinese renminbi, Japanese yen, and British pound sterling.
The SDR was first established as being equal to 0.888671 grams of pure gold, which was also the same as one US dollar. The SDR was renamed a basket of currencies when the Bretton Woods system collapsed.
The currencies in the SDR basket must fulfill both the export and freely usable criteria. If a currency’s issuer is an IMF member or a monetary union that includes IMF members and one of the top five global exporters, it fulfills the export requirement.
For a currency to be classified as “freely usable” by the IMF, it must be extensively utilized to make international payments and widely traded on the major exchange markets.
In Fund financial transactions, freely useable currencies can be utilized.
Ghana’s Special Drawing Rights, according to the IMF
In the email, the IMF stated that if Ghana chose to use its special drawing rights, it may receive about a billion dollars from the Fund.
The IMF approved a record 650 billion dollars to be divided among its members in order to assist them better handle the economic disruptions caused by Covid-19.
“The newly generated SDRs are being credited to member nations in accordance to their leaving quotas, and Ghana will get about $1 billion,” the Fund wrote in the email.
The facility would not be subject to any conditions, and Ghana will have complete discretion over how the funds are spent.
When asked if the facility is a loan, the IMF stated, “This is not a loan, but rather an asset that belongs to the country.”
It was also disclosed that the facility is not a loan, but rather a reserve asset that may be used to boost the country’s overseas reserves.
In order to be able to use the Special Drawing Rights.
Countries can also utilize their SDRs to fulfill financial obligations to the Fund or to conduct business with other countries.”
Government on the $1 billion Special Drawing Rights
According to sources close to the administration, the Fund would be used to help particular sectors.
This implies that the government will not just keep the money in its accounts to help build its reserves.