Dáil Éireann Debate, Tuesday - 12 December 2023
256. Deputy Darren O'Rourke asked the Minister for Finance if he will report on the appraisal of the potential for Ireland to channel SDRs to IMF funds; and if he will make a statement on the matter. [55222/23]
Amharc ar fhreagraSpecial Drawing Rights (SDRs) are an international reserve asset that was created by the International Monetary Fund (IMF) in 1969. Under the IMF’s Articles of Agreement, the IMF has the authority to create liquidity through allocations of SDRs to its member countries. Allocations are made in proportion to each country’s shareholding in the IMF, which is broadly reflective of that countries position in the world economy. SDRs are not a currency but their value is based on a basket of five currencies with one SDR currently equivalent to approximately €1.22.
The IMF has allocated SDRs to its member countries in the 1970s (in response to a marked decline in world reserves, concern about increasing trade restrictions and to deal with changes in the international monetary system), in 2009 (in the context of the global financial crisis) and in 2021 (in response to the unprecedented global health and economic crisis).
A disadvantage of IMF SDR allocations is that they are made to each member country in proportion to its shareholding in the IMF and therefore, allocation amounts do not necessarily reflect the needs of each country. In an effort to address concerns about the untargeted nature of the SDR allocations, the IMF has encouraged countries with strong external positions to reallocate part of their 2021 general SDR allocation, on a voluntary basis, for the benefit of low-income countries. This would be achieved by lending (or “channelling”) a portion of the SDRs in order to provide financing to these countries.
Countries can channel SDRs to IMF funds such as the Resilience and Sustainability Trust, which provides longer-term affordable financing to low-income and vulnerable middle-income countries, or the Poverty Reduction and Growth Trust, which provides concessional loans to low-income counties. My Department is currently in the process of appraising the potential for Ireland to channel SDRs to these IMF funds.
It should be noted that is not possible for Ireland to channel SDRs to multilateral development banks, such as the World Bank or African Development Bank, as to do so would not be compatible with the EU’s prohibition on monetary financing under Article 123(1) of the Treaty of the Functioning of the EU.
