India disagrees to IMF liquidity boost as it may affect financial stability
India extends its disapproval for the International Monetary Fund’s allocation of the new Special Drawing Rights as it may possibly be incapable of driving out its country under economic pressure amid the virus outbreak on Thursday.
According to India’s Minister of Finance Nirmala Sithraman, IMF’s SDRs could cause a huge impact if the budget will be used by other countries for unnecessary actions. The finance minister was also involved in the resistance to the allocation of the new SDRs along with the U.S. Secretary of Treasury Steven Mnuchin.
The IMF’s plan to release new cash reserves could provide flexibility to its 189 members.
“In the current context of illiquidity and flights to cash, the efficacy of an SDR allocation is not certain. Consequently, extraneous demands for these reserves, not related to domestic monetary and financial stability, would be costly, and hence cannot be supported,” Sithraman said in a statement.
The finance minister also stated that a lot of countries depend on reserve funds as a principal solution to its problems.