The IMF is considering a proposal to issue as much as $650 Billion (US) in a new allocation of the SDR. We have covered the SDR extensively here over the years since many have predicted the SDR could some day be a key part of a global monetary reset. One thing that becomes clear if you research the SDR is that there are a lot of misconceptions about the SDR the rules that govern them at the IMF. Here, our approach was to simply find one of the leading experts in the world on the SDR to explain the SDR and how it actually works.
Dr. Warren Coats was the head of the SDR Division at the IMF and there is no better expert on things SDR related. Dr. Coats recently posted this article on his blog to both explain the new SDR allocation proposal and offer his take on it. Below are a couple of excerpts from the article.
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"The IMF’s Articles of Agreement require a long-term global need for additional reserves to justify an allocation. Thus, the Managing Directors call for a new allocation is “based on an assessment of IMF member countries’ long-term global reserve needs, and consistent with the Articles of Agreement and the IMF’s mandate.” “IMF Executive Directors discuss new SDR allocation” While I think an allocation is justified and useful at this time, the underlying motivation of aiding IMF members to fight the economic impact of the Covid-19 pandemic is unfortunate."
The aid motivation is revealed in a Wall Street Journal editorial on March 24, 2021, which unfortunately misrepresents important features of the SDR. “Special dollars for dictators”
Setting aside for a minute that I have long proposed replacing the SDR allocation system described in this article with issuing SDR under currency board rules (i.e., only and to the extent demanded by the market and purchased by the market at market prices), there are a lot of mistakes in this article."
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"The IMF Articles of Agreement in which SDRs and the rules for using them are established are not the legislative product of the U.S. Congress (though the U.S. is needed to support the adoption of these Articles) and thus these rules cannot be changed by the U.S. Congress as suggested by the WSJ."
Please Click Here to Read the Full Article by Dr. Coats
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My added comment: If you you want to have an understanding of how the SDR and the rules governing it actually work, the best source available is Dr. Coats.
