Kenya has earned Ksh.80.8 billion ($737.6 million) worth of special drawing rights (SDRs) from the International Monetary Fund (IMF).
The SDRs refer to interest-bearing international reserve assets created by the multi-lateral lender in 1969 to supplement other reserve assets by member countries.
The SDR is nevertheless not a loan or currency but is a claim on free usable currencies of IMF members.
This means that a country can choose to sell the special drawing rights under voluntary arrangements for actual currency with one SDR currently equivalent to $1.4184.
Alternatively, Kenya can choose to hold the SDRs as part of its foreign exchange reserves.
Moreover, the SDRs can be used for other authorized operations including the payment of loans, obligations and pledges.
At the same time, the SDRs can be tapped for operations and transactions involving the IMF such as the payment of interest, loans or quotas.
On Monday night, the IMF announced its largest allocation of special drawing rights in history, an equivalent issuance of $650 billion which makes part of its intervention to combat the COVID-19 crisis.
“SDRs are a precious resource and the decision on how best to use them rests with our member countries. For SDRs to be deployed for the maximum benefit of member countries and the global economy, those decisions should be prudent and well-informed,” said IMF Managing Director Kristalina Georgieva.
“To support countries, and help ensure transparency and accountability, the IMF is providing a framework for assessing the macroeconomic implications of the new allocation, its statistical treatment and governance, and how it might affect debt sustainability. The IMF will also provide regular updates on all SDR holdings, transactions, and trading – including a follow-up report on the use of SDRs in two years’ time.”
At the same time, Ms Georgieva has challenged countries with stronger external positions to channel some of their earned SDRs to countries ‘who need them most’, including the provision of concessional loans to low-income countries.
The pool of SDRs is allocated to member countries on the basis of their quotas- the maximum amount of financial resources a member is obliged to provide to the IMF which also represents a key determinant of the voting power on IMF decisions.
The IMF has previously carried out four general allocation of SDRs along with a one-time special allocation in 2009.
Member countries including Kenya meanwhile further accumulate SDRs through obtaining financing from the IMF with all loans from the institution being expressed in SDR terms.
Kenya cumulative SDR allocations now stand at 779.9 million or an equivalent $1.1 billion/Ksh.120.6 billion.
This to include 259.6 million existing cumulative SDRs or a respective $368.2 million/Ksh.40.4 billion.
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