Cambodia will receive about $240 million out of the International Monetary Fund’s (IMF) largest-ever distribution of Special Drawing Rights (SDR), equivalent to some $650 billion, which came into effect on August 23.
The Washington-based multilateral lender’s distribution will aid the Kingdom’s economic recovery and better equip it to contend with the devastating repercussions of Covid-19, and especially the spread of new variants of SARS-CoV-2 – the coronavirus that causes the disease.
IMF managing director Kristalina Georgieva said the distribution would provide additional liquidity for the global economy, supplementing member countries’ foreign exchange reserves and limit their dependence on more expensive domestic or external debt.
“The allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis,” she said. “Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis.”
She said SDRs are being distributed to countries in proportion to their quota shares in the IMF. “This means about $275 billion is going to emerging and developing countries, of which low-income countries will receive about $21 billion – equivalent to as much as six per cent of GDP [gross domestic product] in some cases.”
“This SDR allocation is a critical component of the IMF’s broader effort to support countries through the pandemic, which includes – $117 billion in new financing for 85 countries; debt service relief for 29 low-income countries [includes Cambodia]; and policy advice and capacity development support to over 175 countries to help secure a strong and more sustainable recovery,” Georgieva said.
The IMF approved the $650 billion allocation – and $240 million package for Cambodia – on August 2.
And on August 11, Oxfam Cambodia country director Lim Solinn said: “New SDRs will help developing countries, including Cambodia, to cope with the impact of Covid-19 and restore its economy.”
She said the government has made “great efforts” to contain the virus transmission and support vulnerable populations coping with their livelihood loss with its historic cash transfer programme that is built on its developing a social registry system.
Solinn suggested that the government continue working transparently and with civil society organisations to ensure that this additional debt-free financing is used to benefit all Cambodians affected by Covid-19. For example, it could be used to prioritise universal health care and social protection investments that can reduce inequalities for a fairer and more sustainable recovery from the pandemic.
SDRs are an interest-bearing international reserve asset based on a basket of international currencies created by the IMF in 1969 to supplement other reserve assets of member countries. SDRs can be held by Cambodia on account with the IMF as part of its foreign reserve assets or exchanged with other IMF member countries for regular currencies.
According to the IMF: “The SDR is not a currency. It is a potential claim on the freely usable currencies of IMF members. As such, SDRs can provide a country with liquidity. A basket of currencies defines the SDR – the US dollar, euro, Chinese yuan, Japanese yen and the British pound.”