SDRs: Nigeria, Ghana Others Ask Rich Nations to Channel $30Bn to Africa
Following the International Monetary Fund (IMF) Executive Board decision backing a $650 billion special drawing rights (SDRs) allocation, four Africa finance ministers have asked rich nations to reallocate at least $30 billion of new money towards investments in the region.
The ministers expressed their view that this will help countries battling the effects of coronavirus and climate change. The IMF Executive Board announced a decision to back the proposal for a new general Special Drawing Rights (SDR) allocation equivalent to 650 billion dollars to address reserves during the COVID-19 crisis.
Ms Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF) said this in a statement on Friday in Washington DC on the board’s decision to support the general allocation of SDRs.
Alluding to the SDR as the largest allocation in the IMF’s history, Georgieva said that the fund was to address the long term global needs for reserves during the worst crisis since the Great Depression.
“I will now present the new SDR allocation proposal to the IMF’s Board of Governors for their consideration and approval. If approved, we expect the SDR allocation to be completed by the end of August.
“This is a shot in the arm for the world as the SDR allocation will boost the liquidity and reserves of all our member countries, build confidence and foster the resilience and stability of the global economy.
“In 2009, an SDR allocation contributed significantly to recovery from the global financial crisis and I am confident that this new allocation will have a similar benefit now.”
According to Georgieva, the SDR allocation will help every IMF member country, particularly vulnerable countries and strengthen their response to the COVID-19 crisis.
She said that the fund would maintain active engagement with its membership in the months ahead to identify viable options for voluntary channelling of SDRs from wealthier members to support its poorer and more vulnerable countries.
According to her, this is with a view to help their pandemic recovery and achieve resilient and sustainable growth, which will also help boost global economic recovery.
SDRs: Nigeria, Ghana Others Ask Rich Nations to Channel $30Bn to Africa
In an open letter to the leaders of the Group of 20 leading economies, finance ministers from Ghana, the Democratic Republic of Congo, Ivory Coast and Nigeria also urged the rich nations to increase support for poorer countries’ COVID vaccination drive.
The IMF has taken steps to implement a new $650 billion allocation – the largest ever – of its reserve currency, so-called Special Drawing Rights (SDRs). The process is expected to be completed in August.
“Make the IMF’s promised new issue of Special Drawing Rights available as soon as possible and define a clear path forward for their maximal re-allocation and on-lending,” the ministers wrote in the letter published on Friday.
“The urgency now is to accelerate the disbursement of these SDRs to forestall the current emerging market liquidity crisis devolving into an insolvency crisis.”
The economic fallout from the pandemic has exacerbated existing strains on a number of African sovereigns, with Zambia, Chad and Ethiopia all seeking overhauls on their debt burdens.
The new SDR allocation will provide some relief, but the cash gets split among its members based on their shareholdings which means rich ones will benefit most, with only 7% or $42 billion of the total going to the 44 poorer nations.
G20 finance chiefs, who meet on Friday and Saturday in Venice, have on their agenda a recommendation to find ways to ensure a significant part of the $650 billion goes to countries most in need.
The letter, signed by Ghana’s Ken Ofori-Atta, Nigeria’s Zainab Shamsuna Ahmed, DRC’s Nicolas Kazadi and Ivory Coast’s Adama Coulibaly, urged G20 leaders to on-lend at least $30 billion of that money to a new Liquidity and Sustainability Facility (LSF) and the African Stability Mechanism.
“This would catalyse investments to Africa, reduce the liquidity premia on sovereign bonds offered by middle-income countries and incentivize green and sustainability-linked investments,” the letter said.
Rich countries also needed to boost their support for vaccination campaigns against coronavirus. “In June alone there was a 290 million shortfall in vaccine supply,” the finance ministers said. “We really need 1 billion doses donated in the next few months.”
SDRs: Nigeria, Ghana Others Ask Rich Nations to Channel $30Bn to Africa
