WASHINGTON (Reuters) -The International Monetary Fund has a goal of distributing a $650 billion allocation of Special Drawing Rights monetary reserves to member countries this summer, IMF First Deputy Managing Director Geoffrey Okamoto said on Monday.
Okamoto told reporters following IMF and World Bank spring meetings that the allocation, backed last week by Group of 20 countries, will especially help middle-income countries that need to refinance debt amid potentially tighter financial conditions.
“The goal would be to make that allocation some time this summer. I would hope it’s on the early side of the summer,” said Okamoto, the No. 2 IMF official.
He added that IMF staff were “quite motivated” to get the SDR plan ready for IMF board approval within the next couple of months.
Okamoto said the SDRs would act as “one bit of insurance against financial conditions tightening” for middle-income countries, which face the greatest amount of debt refinancing needs over the next year.
The Fund has warned that faster recovery could lead to a spike in interest rates that could cause fund outflows from emerging markets, exacerbating pandemic-related debt problems.
MORE DEBT RESTRUCTURING
Okamoto said that more countries will need to seek debt restructuring through a common G20-backed debt framework than the three that have sought relief so far - Chad, Ethiopia, and Zambia.
He said that while there are negative implications in seeking restructurings, “I think the balance tilts towards countries needing to approach creditors to deal with their unsustainable debts. The benefits of doing so far outweigh the downsides in this environment.”
The IMF and World Bank meetings last week produced optimism that countries would contribute additional resources to Sudan to clear their arrears to the two institutions, allowing for new programs to start, Okamoto said.
“We have a little more work to do in terms of raising the requisite financial resources to get us there,” Okamoto said, adding that he and IMF Managing Director Kristalina Georgieva will follow up with donor countries on Sudan’s funding requests over the next couple of months to reach a decision point.
Okamoto said consultations would continue this year and in 2022 on possible changes to the Fund’s quota-based shareholding structure under a review due for completion by the end of 2023, but for now it has sufficient lending to meet expected loan program needs.
“The Fund maintains, in my view, sufficient capacity to deal with the risks that we see,” Okamoto said.
He added that the Fund is looking forward to strong engagement with Ecuador’s new president-elect, banker Guillermo Lasso, to put the country back on a growth path.
Reporting by David LawderEditing by Paul Simao
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