Yellen backs new IMF entitlement allocation to help poor countries. US Treasury Secretary Janet Yellen supported a new allocation of Special Drawing Rights from the International Monetary Fund (SDR), but stressed that broad parameters are needed to drive transparency on how reserves are used and negotiated.
In a letter to G20 finance officials, Yellen said Thursday that a new SDR allocation could improve liquidity in poor countries and help their health and economic recovery efforts, reversing previous government opposition. from the United States.
The head of the US Treasury did not specify the size of the possible allocation of SDRs, which can be converted into hard currency by members of the IMF. G20 finance officials will discuss the matter when they meet via video conference on Friday.
Italy, which chairs the G20 this year, and other members of the rich and emerging economies group have endorsed a $ 500 billion allocation, but the Biden administration had kept their opinion in reserve until now.
Yellen said an SDR allocation and measures to boost low- and zero-interest loans by the International Monetary Fund and the World Bank would boost efforts to contain the pandemic and mitigate its devastating impact, especially in poor countries.
“Without greater international action to support low-income countries, we risk a dangerous and permanent divergence in the world economy,” Yellen said.
“An allocation of new Special Drawing Rights (SDRs) at the IMF could increase liquidity in low-income countries to facilitate their much-needed health and economic recovery efforts,” he said.
“For this tool to be effective, the G20 must work with a broad coalition of countries on a set of shared parameters for greater transparency and accountability in how SDRs are shared and used.”
IMF spokesman Gerry Rice hailed Yellen’s comments as “a very useful letter on a very important issue.”