G7 to consider using IMF for Covid aid: French source

PARIS (AFP) - G7 nations will consider whether to use the IMF to mobilise US$ 500 billion in aid to the world’s poorest nations to respond to the Covid-19 pandemic, a French source said yesterday.

The finance ministers and central bankers of the Group of Seven nations Britain, Canada, France, Germany, Italy, Japan and the United States will hold a virtual meeting today.

Two subjects that are set to dominate the agenda, according to the source, are the global economic situation in light of the pandemic and the situation faced by countries with the least revenue to take public health and social measures. 

“We expect that the G7 meeting could make important decisions, notably a new allocation of SDRs”, such as in 2009 during the global financial crisis.

SDRs, or special drawing rights, were created by the International Monetary Fund in 1969 and can be exchanged for currencies such as the US dollar or euro. SDRs are attributed to each member country.

In 2009, a special allocation of nearly 183 billion SDRs helped countries cope with the effects of the global financial crisis. 

That was about half of the new allocation of US$ 500 billion in SDRs supporters are considering now.

The new allocation would allow the sub-Saharan African nations in the direst fiscal situation to receive US$ 18 billion directly. Indirectly, they would be able to borrow SDRs allocated to other nations at very low interest rates.

“Until now, we were confronted by the opposition of the United States, but in our latest contacts with the new administration we could sense an openness on their part,” said the source close to French Finance Minister Bruno Le Maire. The source said the first step would be to reach consensus among the G7 nations, who hold a quarter of the IMF’s capital, and then the G20 nations at a February 26 meeting. That would open up the way for a decision at the IMF’s annual meeting in April. The source said IMF chief Kristalina Georgieva supported the additional allocation and that there was a consensus among European nations in favour as well.