This is the plan to rescue poor countries from the pandemic

New York, United States Published: Jun 24, 2021, 11:20 PM(IST)

Vials labelled "AstraZeneca, Pfizer - Biontech, Johnson&Johnson, Sputnik V coronavirus disease (COVID-19) vaccine" are seen in this illustration Photograph:( Reuters )

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The IMF’s executive board is expected to advance the proposal during a meeting Friday before forwarding it for final approval to its board of governors, which comprises representatives of the fund’s 190 member nations

In a global economy defined by extreme forms of inequality, the pandemic has widened the divide.

Now, fears that the world may emerge from the pandemic more unequal than ever have prompted a substantial effort to close the gap: Under a proposal nearing completion, the International Monetary Fund would issue $650 billion worth of reserve funds, essentially creating money that troubled countries could use to purchase vaccines, finance health care and pay down debt.

The IMF’s executive board is expected to advance the proposal during a meeting Friday before forwarding it for final approval to its board of governors, which comprises representatives of the fund’s 190 member nations. Officials hope it will gain final passage by August.

The International Monetary Fund’s approach involves not money but so-called special drawing rights — reserve funds that the institution credits to the accounts of its member nations. Governments can swap these SDRs for regular currency, to spend as needed.

Under the rules governing the IMF, member nations contribute to the institution’s coffers, with their obligations determined largely by the size of their economies. The new reserves would be distributed according to this ranking, meaning that the largest economic powers like the United States would gain the biggest tranche.

Fund officials are crafting a plan under which wealthier member countries would transfer some of their reserves to poorer countries to allow an expansion of debt reduction and poverty-fighting programs.

IMF managing director Kristalina Georgieva said the fund’s plan would rely on “encouraging voluntary channeling of some of the SDRs,” with a goal of yielding “$100 billion for the poorest and most vulnerable countries.”

The United States is prepared to make available about one-fifth of its allocation, worth approximately $20 billion, said a Treasury official who spoke on condition of anonymity. The Biden administration is seeking to persuade other members of the Group of 7 to contribute similar shares.

In Washington, the universal nature of the proposed allocation has stirred up opposition from Republicans, who argue that it would burnish the finances of U.S. adversaries like China, Russia and Iran while doing little to help poor countries.

Sen. John Kennedy, R-La., this month introduced a bill that would block special drawing rights allocations from going to “perpetrators of genocide and state sponsors of terrorism” without approval from Congress.

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