Catenaa, Tuesday, June 30, 2026- The US should lead an initiative to expand the IMF’s financial capacity by at least $650 billion to help blunt the impact of the Iran war.
In a letter to President Donald Trump and Treasury Secretary Scott Bessent, a group of Democrats said the US, the IMF’s largest shareholder, should press for an expansion of so-called special drawing rights at least on the scale of the most recent expansion, a record $650 billion in 2021 to address the Covid crisis.
SDRs, as they’re known, are reserve assets allocated to IMF members and serve as the foundation for the Washington-based fund’s lending. The IMF hasn’t yet called for an increase.
In April, it trimmed its global growth forecast based on an assumption of a relatively short-lived Iran war, while flagging the risk of more severe scenarios.
Supply shocks from the conflict “risk setting off cascading trade, financial and debt crises with profound repercussions for both developing countries and advanced economies,” 27 House Democratic lawmakers led by Joyce Beatty of Ohio wrote in the letter to Trump and Bessent.
“SDRs are a powerful tool to mitigate these risks and help restore global financial stability, at no cost to US taxpayers,” the group wrote. “We urge you to leverage the US’s significant influence on the IMF Board to seek a general SDR allocation as soon as is feasible.”
An expansion of SDRs requires 85% of IMF member votes to be approved. The US holds 16.5% of voting power.
The 2021 boost to SDRs provided a “lifeline” to developing countries, and a similar allocation should be made after the Middle East war and closure of the Strait of Hormuz, the legislators wrote.
“The American financial system, American businesses, and American workers and consumers would all feel the effects of slowed global growth, supply chain disruptions, commodity inflation, and financial instability,” they wrote. SDRs “would also stimulate demand for US exports, including both manufactured and agricultural goods.”
SDRs can be converted into five currencies: the US dollar, euro, yen, British pound and yuan. The US Treasury holds SDRs as part of its Exchange Stabilization Fund, while many countries hold those assets in their central banks as foreign exchange reserves.
As of now, the IMF has said that countries are mainly seeking policy advice amid the Middle East conflict, with some requesting augmentation of, or advanced disbursements from, existing programs. Bangladesh and Malawi are in talks for new programs, while Ethiopia asked to bring forward financing to this year.
Gambia asked for a 20% quota increase and a six-month extension of its program.
The fund has about $170 billion in outstanding loans to members as of June 26, out of a total lending capacity of $1 trillion.
