The world's seven largest economies have agreed to deliver more financial support through the International Monetary Fund (IMF) for low and middle income nations hit by the coronavirus pandemic.
Britain, which is chairing the Group of Seven (G7) this year, announced on Friday that finance ministers had agreed to support a "new and sizeable" increase in the volume of Special Drawing Rights (SDRs).
SDRs, created in 1969 are an internal currency used by the IMF, which help governments protect their financial reserves against global currency fluctuations.
The asset is also used as the basis of loans from the fund's crisis-lending facilities. Although there aren't any SDR coins or banknotes, and it's not a currency itself — the IMF uses it to calculate its loans to needy countries, and to set the interest rates on those loans.
UK chancellor Rishi Sunak said that the "milestone agreement" among the G7 "paves the way for crucial and concerted action to support the world’s low-income countries, ensuring that no country is left behind in the global economic recovery from coronavirus."
He added that it was a "significant step" that laid the groundwork for approval by G20 countries and at the spring meeting of the IMF in April.
The Treasury said extra SDRs would help poorer countries "pay for crucial needs such as vaccines and food imports, and improve the buffers of emerging markets and low-income countries."
While the size of the aid package has not yet been announced, it is thought to be in the region of $500bn (£360bn). Last year, the IMF had pushed for a similar amount, but the expansion was opposed by former US president Donald Trump.
The amount will be finalised following talks in Washington between US treasury secretary Janet Yellen and Congress. Yellen, who supported an expansion, has called for more transparency about how the SDRs would be used and traded.
"As part of the SDR discussions, it was agreed that the G7 would work with the IMF to make progress on enhancing transparency and accountability around the usage of SDRs and explore how countries could voluntarily recycle their SDR holdings to further support low-income countries," the Treasury said.
The news signals the first expansion of IMF's reserves since the financial crisis in 2009. The fund's managing director, Kristalina Georgieva said that the G7 finance ministers’ meeting was “productive."
So far, over 100 nations have approached the IMF about receiving help since the onset of COVID-19 led to the biggest contraction of the global economy since the 1930s.
G7 leaders, including US president Joe Biden are due to meet at a retreat in Cornwall on 11 to 13 June after last year's event was cancelled due to the coronavirus pandemic.
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