IMF's SDR could provide 'meaningful support' to Pakistan: Moody's

Moody’s Investor Service has said that the International Monetary Fund’s (IMF) Special Drawing Rights (SDR) could provide ‘meaningful support’ to countries like Pakistan.

Measured against upcoming cross-border debt repayments, the additional SDR allocations could provide meaningful support for Zambia, Suriname, Tajikistan, Pakistan and Namibia, said Moody's.

Days ago, the International Monetary and Financial Committee (IMFC) of the IMF announced to support an allocation of $650 billion in new Special Drawing Rights (SDRs) in response to the coronavirus pandemic.

Moody’s however stated that the additional resources would help alleviate external liquidity pressures, they would not solve fundamental credit challenges, such as those that led to the recent default in Zambia. “The ultimate effect of the SDR allocation on sovereign credit would depend on the scope and effectiveness with which sovereigns used these new resources to not only address immediate cross-border repayment needs, but also to support the economic and revenue recovery from the pandemic,” it said.

Moody’s said that the new SDRs would be allocated according to IMF members' existing capital subscriptions or quotas. “As such, more than 60 percent of these new reserve assets would be distributed to 34 advanced economies, led by the US, which stands to receive $113.1 billion in SDRs based on its current 17.4pc quota,” it said.

On Monday, IMF First Deputy Managing Director Geoffrey Okamoto said that the International Monetary Fund intends to distribute the $650 billion allocation of Special Drawing Rights monetary reserves to member countries this summer.