IMF pumps $250b into global forex reserves

WASHINGTON - The International Monetary Fund has pumped about $250 billion into foreign-exchange reserves worldwide, acting on an April call from leaders of the Group of 20 nations to boost global liquidity.Countries will be able to convert the money, to come from so-called Special Drawing Rights, into hard currencies through “voluntary trading arrangements” with other members, the IMF said. The SDRs are the institution’s unit of account based on a basket of currencies. There are no notes or coins denominated in SDRs, nonetheless the SDR does play a role as an interest-bearing international reserve asset. The allocation, approved by the IMF’s board of governors earlier this month, will not increase the fund’s pool of money available for lending, the IMF said. “It will, however, provide members with an additional method to obtain hard currencies.”Another smaller reserves allocation of about $33 billion will take place Sept. 9 and will be limited to members that joined the lender after 1981, such as countries from the former Soviet bloc, the IMF said. About $110 billion of the total allocation will go to emerging-market and developing countries and $20 billion to low-income nations.“A number of members with sufficiently strong external positions” have already said they are ready to set up or expand existing arrangements enabling the sale or purchase of SDRs, the IMF said. The lender typically acts as a broker and arranges transactions between parties at no cost.