The IMF has called on private creditors to provide debt relief for the world’s poorest nations. Credit analysis on these Emerging Market countries has shown that without debt relief they are likely to default. Defaults in EM countries will almost certainly trigger their economic development to grind to a halt and induce a period of pronounced poverty to countries such as Ghana, Chile and India who have been developing at a quick rate in recent years.
Private investors last month said they are open to offering low-income countries cash to ease the debt burden of $140 billion due this year. However, it is likely that this will not meet the complete fulfillment of the countries’ debt obligations. So, the IMF is also exploring redistributing Special Drawing Rights (SDR) from richer to poorer countries. SDR’s are a controlled currency created by the IMF and distributed to each of its 189 member countries, in a proportion reflecting their relative economic strength. The redistribution would facilitate the transfer of SDR’s from countries with a surplus to countries who need them most so they can convert them to US Dollars and be used to pay of debt.
We know SDR’s are tricky, If you are still confused on SDR’s, head here: