The Treasury Department is working with the International Monetary Fund to help provide up to $650 billion in currency aid to countries hit hardest by the Covid-19 pandemic.
An announcement Friday from Treasury indicated it is aiding the IMF toward an allocation of $650 billion in Special Drawing Rights that would “help build reserve buffers, smooth adjustments, and mitigate the risks of economic stagnation in global growth.”
SDRs are reserve assets that countries can use to supplement their foreign exchange assets, such as gold and U.S. dollars.
The Treasury announcement indicated that the SDR allocation is within the level the department is allowed to allocate without congressional approval. Treasury Secretary Janet Yellen and Sen. John Kennedy, R-La., recently had a heated exchange over the SDR issue during a public hearing.
Essentially, the agreement would allow countries to exchange their SDRs for U.S. dollars. Global demand for American currency has been a recurring issue throughout the pandemic and has resulted in the Federal Reserve also to engage in a robust dollar-swap program around the world.
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