Lebanon to receive $1.135bn in Special Drawing Rights from IMF

Country will receive funds on September 16 after leaders agreed on a new government to tackle economic collapse

Lebanon is in the grip of a deep financial crisis that has pushed three quarters of its population into poverty. Photo: AFP

Lebanon's finance ministry said it will receive $1.135 billion in reserve assets, known as Special Drawing Rights, from the International Monetary Fund on Thursday.

It comes after a breakthrough in the country's political impasse, when its leaders agreed to form a new government last week.

The allocation includes $860 million approved this year and $275m from 2009 that will be deposited to the Banque du Liban's account, the ministry said on Monday.

"The finance ministry had asked the IMF to transfer the right to SDRs to Lebanon, particularly those from 2009," it said.

Lebanese President Michel Aoun announced the formation of a government on September 10, after a year of political deadlock, paving the way for the country to restart talks with the IMF for an aid package.

On Monday, Mr Aoun said he hoped the new Cabinet's policy programme would include resuming talks with the IMF, according to a statement on Twitter.

The leaders agreed on a Cabinet line-up, headed by telecoms billionaire Najib Mikati as prime minister, after wrangling for weeks over the distribution of government ministries between Lebanon’s various political parties.

Central bank official Youssef Khalil was named the finance minister and Amin Salam as economy minister.

The IMF's allocation will be a much-needed boost to the country, which is facing one of the deepest financial and economic crises in modern history.

Seventy-eight per cent of Lebanon's population is now living in poverty as subsidy cuts have led to a steep rise in cost of staples such as fuel and bread, a recent UN report said.

The report, published by the UN Office for the Co-ordination of Humanitarian Affairs, called for $378.5m in funding for an emergency response plan to help alleviate the crisis.

Millions of Lebanese, along with Palestinian and Syrian refugee communities, have been affected by the economic crisis that the World Bank has ranked among the world’s top 10 crises – possibly even the top three – since the mid-19th century.

IMF special drawing rights are an international reserve asset created by the Washington-based lender to supplement the official reserves of its member countries.

They are the fund's unit of exchange and are made up of a basket of the world’s five leading currencies – the US dollar, the euro, the yuan, the yen and the British pound.

SDRs are distributed to countries in proportion to their quota shares in the IMF.

The IMF’s SDRs help to increase countries’ international reserves and reduce their reliance on more expensive domestic or external debt.

Once IMF members receive their allocation, they can hold it as part of their foreign exchange reserves.

The right to trade SDRs allows members to receive hard currencies. These are not priced according to the creditworthiness of the borrower.

The share of emerging market and developing economies is about 42.2 per cent in the IMF quota, which means about $275bn of the current SDR allocations is going to emerging and developing countries.

Of that amount, low-income countries will receive about $21bn, with allocations amounting to as much as 6 per cent of a country's gross domestic product in some cases, according to IMF data.