Finance Minister Dr Nigel Clarke has indicated that Jamaica’s gross foreign exchange reserves will, at the end of August, jump to a new record level of just under US$5 billion as a result of the International Monetary Fund (IMF) Board of Governors’ approval of a general allocation to member states of Special Drawing Rights (SDRs) equivalent to US$650 billion.

The IMF had on August announced that the move was aimed at boosting global liquidity amid the ongoing COVID-19 pandemic and would become effective August 23. The newly created SDRs will be credited to IMF member countries in proportion to their existing quotas in the Fund.

“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis,” IMF Managing Director Kristalina Georgieva had said.

“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis.”

Commenting on Twitter on Wednesday (August 4), Clarke said: “After this new SDR issue is completed, by end of August 2021, our gross foreign exchange reserves will therefore increase by a further US$520 million, approximately.”

He added: “As at June 30, 2021, Jamaica’s gross foreign exchange reserves were US$4.3 billion, the highest level of Gross Foreign Exchange Reserves in Jamaica’s history.

“Given our current level of foreign exchange reserves, therefore, Jamaica may not need to convert the SDRs into US$ immediately.

“However, whether we convert or not, these SDRs are still Jamaica’s assets which will contribute to an increase in our gross foreign exchange reserves bringing them to new record levels of just under US$5 billion by the end of August.

“The good news is that Jamaica is stronger, safer, more secure and more economically resilient with this fresh global issue of SDRs.”

About US$275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries, the IMF had indicated.

“We will also continue to engage actively with our membership to identify viable options for voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve resilient and sustainable growth,” Georgieva said.

The IMF noted that one key option was for members that have strong external positions to voluntarily channel part of their SDRs to scale up lending for low-income countries through the IMF’s Poverty Reduction and Growth Trust (PRGT).

Concessional support through the PRGT is currently interest free and the IMF said it was exploring other options to assist poorer and more vulnerable countries in their recovery efforts.

The Fund said a new Resilience and Sustainability Trust could be considered to facilitate more resilient and sustainable growth in the medium term.