The International Monetary Fund (IMF) has approved the use of reserve assets for 'hybrid' financial instruments. This decision allows member states to utilize their Special Drawing Rights (SDRs) to obtain 'hybrid capital' instruments, which combine debt and equity. The move aims to increase the lending capacity of multilateral development banks (MDBs) for development projects. The African Development Bank (AfDB) and the Inter-American Development Bank (IDB) have welcomed this decision, as it could potentially unlock close to $80 billion in additional lending capacity by leveraging existing SDRs up to four times their current level. However, the new use of SDRs is subject to a cumulative cap of 15 billion SDRs. The IMF will conduct a review once cumulative hybrid capital contributions surpass SDR 10 billion or in two years' time, whichever comes first. [a6f7f71a]
The IMF's approval of the use of reserve assets for 'hybrid' financial instruments is a significant development in increasing the lending capacity of multilateral development banks (MDBs). Member states can now utilize their Special Drawing Rights (SDRs) to obtain 'hybrid capital' instruments, combining debt and equity. This decision has been welcomed by the African Development Bank (AfDB) and the Inter-American Development Bank (IDB), as it has the potential to unlock close to $80 billion in additional lending capacity by leveraging existing SDRs up to four times their current level. However, there is a cumulative cap of 15 billion SDRs for the new use of SDRs, and the IMF will conduct a review once cumulative hybrid capital contributions surpass SDR 10 billion or in two years' time, whichever comes first. [a6f7f71a]