ACET supports call for urgent SDR allocation to developing countries

The African Center for Economic Transformation (ACET) has signed an open letter calling on the Finance Ministers of the G20 and the IMF to “urgently support” a $3 trillion allocation of IMF Special Drawing Rights (SDRs) as a way to aid developing countries in the face of COVID-19. “Of the trillions spent on stimulus packages around the world so far, wealthy countries account for 88 percent, while developing countries account for the rest.”

The letter, from the African Forum and Network on Debt and Development (AFRODAD), is part of an international advocacy effort to ensure the pandemic does not push low- and middle-income economies, including those in Africa, deeper into debt. “A substantial issuance of SDRs would enable countries to boost reserves and stabilize economies, helping to minimize other economic losses,” the letter states.

In the past few months, widespread support for a new SDR allocation has been expressed at the highest levels, from the Secretary General of the United Nations to African Heads of State and the Financial Times Editorial Board. The Brookings Institution, a leading public policy think tank in Washington, D.C., proposed a major issuance of SDRs as early as March 2020.

SDR allocation has also been a key discussion topic for the Transformation Leadership Panel (TLP) and advocated for by most TLP member organizations, including the UN Economic Commission for Africa and the ONE Campaign.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. So far, the equivalent of about $281 billion has been allocated to members, the bulk of which came in 2009 amid the global financial crisis.

Throughout 2020, opposition from the United Sates and former President Donald Trump prevented the IMF from agreeing on a new general allocation. But momentum is now building. Under the new administration of President Joe Biden, the United States has expressed a favorable position on SDRs, while the G20 Italian presidency has also suggested it will be a priority. The G7 has signaled support as well.

“So far, the international financial response to the pandemic crisis fails to uphold the standard of solidarity we all should expect in the face of such threat,” the open letter states. “A new SDR allocation would send a strong signal of renewed multilateral coordination that puts life first and is within your immediate reach.”

Open Letter to G20 Finance Ministers and the IMF: Civil Society Organizations Call for Quick Special Drawing Rights Allocation

COVID-19 spurred health, social and economic crises that hit developing countries the hardest. The pandemic deepened development and inequality challenges and erased years of progress on poverty reduction and women’s rights. Countries continue to face fallen revenues, lower foreign exchange earnings and higher fiscal and debt burdens. Many of these countries cannot afford expenditures vital to bring the pandemic under control, increase social protection to survive lockdowns and prepare to recover with equity and resilience. Of the trillions spent on stimulus packages around the world so far, wealthy countries account for 88 percent, while developing countries account for the rest.

A multilateral solution is needed. One that will not push low- and middle-income economies into further debt distress. To that end, we ask that you urgently support a new allocation of IMF Special Drawing Rights (SDRs) in the amount of US$3 trillion. We believe that an allocation of this size is required to address the real needs in a decisive and sustainable way. In 2009, the international community responded to a crisis of much smaller scope and proportions with an allocation of US$250 billion in Special Drawing Rights. This initiative had a significant role in restoring market confidence and supporting global recovery. Last year, even before the scale of this crisis was clear, IMF estimates placed emerging economies’ financing needs at US$2.5 trillion.

A new and significant allocation of SDRs would enable countries to boost reserves and stabilize economies, helping to minimize other economic losses. It would free up funds urgently needed for the pandemic response, including gender-responsive public health systems, universal social protection and comprehensive vaccine rollouts. It would also provide much-needed foreign exchange resources to countries whose capacity to earn them continues to be severely constrained in the short to medium term. SDRs do not add to countries’ debt burdens, promote debt sustainability and do not represent a loss for anyone – only a gain. Importantly, they would provide a liquidity injection with economic stimulus benefits worldwide.

So far, the international financial response to the pandemic crisis fails to uphold the standard of solidarity we all should expect in the face of such threat. A new SDR allocation would send a strong signal of renewed multilateral coordination that puts life first and is within your immediate reach. We ask for your leadership in ensuring the international community rises up to this historic moment to do what is needed.

Click here to add your organization’s signature.

1 Comment

  1. Avatar Tony Oteng-Gyasi says:

    A most timely request. Will not only help developing economies but also boost the whole world economy, whether used for medication and vaccines or manufactured goods. For economies which cannot print money at will, this will be a fair, equitable and prudent intervention.




    0



    0

Have your say here:

Your email address will not be published. Required fields are marked *