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.”