IMF drawing rights to boost forex by $18bn

The country’s foreign exchange reserves will be bumped up by $18 billion with the International Monetary Fund allocating additional Special Drawing Rights to India. The country’s forex reserves stood at $617 billion as of August 20, buoyed by strong inflows of foreign investment. Economists expect the reserves to increase further as the RBI continues to purchase dollars.

The IMF has allocated SDR of 12.6 billion, which is equivalent to $17.9 billion on August 23, 2021. The total SDR holdings of India now stands at 13.7 billion (equivalent to around $19.4 billion at the latest exchange rate) as of August 23, 2021. This increase in SDR holdings will be reflected in the foreign exchange reserves data that shall be published for the week ended August 27, 2021.

IMF makes the general SDR allocation to its members in proportion to their existing quotas in the fund. The IMF board had approved a general allocation of about SDR 456 billion on August 2, 2021 (effective from August 23), of which the share of India is SDR 12.6 billion. Since the SDR is like a cheap credit line, it does not have an impact on the RBI balance sheet although it does add to the reserves.

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