Minister McGrath announces €800 million financing ahead of the IMF and World Bank Spring Meetings

Minister McGrath announces €800 million financing for international climate action and pandemic preparedness ahead of the IMF and World Bank Spring Meetings

The Minister for Finance Michael McGrath T.D. travels to Washington D.C. this afternoon, 16 April 2024, for the Spring Meetings of the IMF and World Bank, having secured Government approval at this morning’s Cabinet meeting to provide €800 million in financing for international climate action and pandemic preparedness.

The Spring Meetings provide the Minister with a valuable opportunity to engage with his fellow finance ministers from around the world, along with leading figures from the IMF and World Bank, to discuss current and emerging economic, fiscal and monetary developments.

This support will be provided by channelling 20% of Ireland’s 2021 allocation of Special Drawing Rights (SDRs) to the IMF’s Resilience and Sustainability Trust.

Special Drawing Rights are allocated to member countries of the IMF – most recently in 2021 in response to the unprecedented global health and economic crisis. These assets are held by the Central Bank of Ireland and today’s decision will allow 20% of the 2021 allocation to be channelled (i.e. loaned) to the Resilience and Sustainability Trust. This is in response to call from the IMF Managing Director, Kristalina Georgieva, to the world’s most advanced economies to help poorer countries by using their allocated SDRs to tackle current and emerging crisis’s facing them across a range of issues.

Speaking ahead of the Spring Meetings today, Minister McGrath commented:

“As Minister for Finance and Ireland’s Governor at both the IMF and World Bank, I am looking forward to participating in this year’s Spring Meetings in Washington D.C.

I am delighted to announce that Ireland will now channel 20% of our 2021 IMF Special Drawing Right allocation to the IMF Resilience and Sustainability Trust, amounting to approximately €800 million. This IMF Trust is a vital instrument to help low-income and vulnerable middle-income countries build resilience to external shocks and ensure sustainable growth, contributing to their longer-term balance of payments stability.

Ireland’s Policy for International Development focuses on contributing to the UN Sustainable Development Goals and, in particular, to reaching and assisting those who are furthest behind.

During my visit, I will hold a series of constructive engagements with my fellow Finance Ministers, the IMF and the World Bank on how best to address the economic challenges we are currently facing and those on the horizon.

This year’s Spring Meetings provide a timely opportunity for economic and financial leaders from across the world to demonstrate the value of multilateralism by exchanging experiences on effective policy-making to meet our shared global goals.”

Over the course of the Spring Meetings, Minister McGrath will have engagements including meeting with the IMF MD Georgieva, and the President of the World Bank, Ajay Banga. He will also attend a range of meetings including the International Monetary and Financial Committee, a roundtable discussion on Ukraine, the Financial Action Task Force, the Coalition of Finance Ministers for Climate Action and will take part in a high level speaking engagement at the Atlantic Council with US and Washington-based policy makers and investors.

Notes to editors

Special Drawing Rights (SDRs) are an international reserve asset that was created by the IMF in 1969. SDRs are not a currency but their value is based on a basket of five currencies (the US Dollar, the Euro, the Chinese Renminbi, the Japanese Yen and the British Pound Sterling). One SDR is currently equivalent to approximately €1.23.

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 and are generally held by National Central Banks (in Ireland’s case, the Central Bank of Ireland) as part of a country’s official external reserves.

Allocations of SDRs to member countries were made 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).

In total, SDRs with a value of circa €800 billion has been allocated of which circa 70% was allocated in 2021. Ireland has been allocated circa €5 billion of which circa €4 billion was allocated in 2021.

SDR allocations are made to each member country in proportion to that country’s shareholding in the IMF which reflects the relative strengths of their economies. This means that the allocation does not necessarily reflect the needs of each country. Of the allocations made in 2021, approximately 60% went to advanced economies (including Ireland), 35% went to emerging economies, and just 55 went to low-income countries.

In an effort to address the untargeted nature of the SDR allocation, the IMF has encouraged countries with strong external positions to loan (or channel) part of the SDR holdings on a voluntary basis for the benefit of lower-income countries.

The Government has approved the channelling of 20% of the 2021 SDR allocation to the IMF’s Resilience and Sustainability Trust. This contribution, which is equivalent to circa €800 million, will be supplemented by an exchequer grant of €13.5 million.

The IMF’s Resilience and Sustainability Trust was created in 2022 and provides longer-term affordable financing to low-income and vulnerable middle-income countries as they tackle long-term structural challenges such as climate change and pandemic preparedness.

The Resilience and Sustainability Trust provides longer-term loans with principal repayments made between 10 and 20 years after disbursement.

Under the current eligibility criteria, over 140 IMF member countries could qualify for Resilience and Sustainability Trust financing.

Legislation is required in order to effect the Government decision which is being developed by the Department of Finance.