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Mozambique receives €261 million in IMF allocation of SDRs

The Government of Mozambique will receive 216 million units of Special Drawing Rights (SDR), worth around €261 million, according to a distribution proportional to its share in the International Monetary Fund (IMF).

According to a document approved by the IMF’s board of directors and which will today begin to increase the foreign exchange reserves of all members of the Fund, Mozambique will receive 216 million SDR units, corresponding to US$305.9 million at the current exchange rate.

“The proposal makes a case for an allocation of US$650 billion (about SDR 456 billion), based on an assessment of IMF member countries’ long-term global reserve needs. It also includes measures to enhance the transparency and accountability in the reporting and use of SDRs while preserving the reserve asset characteristic of the SDR,” reads a technical note from the IMF on the issue.

The note also notes that “the allocation will help many member states to ease the need for adjustment in the face of liquidity constraints and avoid unbalanced policies, while providing room to increase spending on crisis response and vaccines”.

Developing countries and emerging markets will receive US$275 billion (€235 million) of the total, IMF executive director Kristalina Goergieva said on August 2nd in the Fund’s approval of the issue.

Member countries began discussing an SDR issuance as early as last year because of the impact of the Covid-19 pandemic, which has thrown the global economy into a 3.5% recession, but is expected to grow by 6% this year, according to the latest World Economic Outlook forecasts.

The issuance of SDRs is an instrument created by the IMF to provide liquidity and expand the resources available to states with financial needs, working as a kind of capital increase for the IMF, reinforcing the fight against the pandemic and helping relaunch economic growth.

In an SDR unit, the US dollar has 41.73% of the weight, the Euro 30.93%, the Chinese yuan 10.92%, the Japanese yen 8.33% and the pound sterling 8.09%, and has a value quote published daily by the IMF.

On Sunday, 1 SDR corresponded to €1.2107.

Of CPLP members in Africa, Angola is to receive the largest allocation, the equivalent of €852 million, followed by Mozambique with €261 million, Equatorial Guinea with €181.6 million, Guinea-Bissau with €32.6 million, Cabo Verde with €27.8 million, and Sao Tome and Principe, which is to receive almost €17 million in foreign exchange reserves.

In all, Portuguese-language Countries in Africa (PALOPs) are to receive a reinforcement of €1,372.2 million euros, or 1,134 million units of SDRs.

The SDR issuance will help countries having difficulty balancing their accounts and strengthening their commitment to combating the spread of the pandemic, and has been described by African countries as essential for relaunching economic growth in the region.

African countries, notably those in sub-Saharan Africa, have argued that their share of SDR is disproportionately low given their needs, stressing the low vaccination rate and the need to maintain funding of projects with the capacity to strengthen infrastructure and thus guarantee the attractiveness of new investments that make the region grow.

The IMF has urged that those (advanced) countries least in need of this capital injection should transfer part of their increased SDRs to developing countries, with the main powers having agreed to channel at least US$1 billion, equivalent to around €854 million, to countries with the most difficulties.

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