IMF approves record R9-trillion to help countries deal with pandemic fallout
The International Monetary Fund (IMF) has approved more than R9 trillion ($650 billion) to help countries weather the effects of the Covid-19 pandemic.
The funding (effective on 23 August 23) will take the form of a general allocation of special drawing rights (SDRs).
It's the largest SDR allocation in the history of the Fund.
IMF Managing Director Kristalina Georgieva described it as “a shot in the arm for the world” that will help boost global economic stability.
The IMF’s Board of Governors approved a new general allocation of SDRs equivalent to US$650 billion. Managing Director @KGeorgieva says it’s a historic decision reached at a time of unprecedented crisis. Read more: https://t.co/x8KCBR7G3l pic.twitter.com/ZYUbZyih4n— IMF (@IMFNews) August 2, 2021
If the bulk of that money goes to rich countries, won't it defeat the purpose of the allocation?
The IMF says about $275 billion will go to emerging markets and developing countries, including low-income countries.
Bruce Whitfield interviews Isaah Mhlanga, Chief Economist at Alexander Forbes.
We need to take a step back and acknowledge that the IMF is not a charity organisation, says Mhlanga.
Countries do subscribe and they pay a subscription fee to access help when they need it.Isaah Mhlanga, Chief Economist - Alexander Forbes
Yes, they have helped many countries that have raised small subscriptions in terms of their contribution historically, but we also have to understand it in the context that countries access help in the proportion that they contribute financial resources that have accumulated in the SDR reserves.Isaah Mhlanga, Chief Economist - Alexander Forbes
Emerging markets and developing economies contribute far less compared to the rich countries by virtue of the rich countries having more financial muscle... So in times of crisis whoever holds the biggest chunk of the purse is going to demand more of the reserves that are there.Isaah Mhlanga, Chief Economist - Alexander Forbes
But the rich world cannot keep insulating itself from the poor world in perpetuity, comments Whitfield.
"You're as vulnerable as anybody else if your neighbour is hungry."
"You can't build a nice house in a bad neighbourhood and live comfortably there" Mhlanga concurs.
"Ultimately it's going to have a negative impact on you and that has been recognised a long time ago".
But that wisdom is not always applied, he says.
Now the IMF is calling for countries to channel some of their SDR allocations to poorer countries.Isaah Mhlanga, Chief Economist - Alexander Forbes
Listen to the conversation on The Money Show:
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