Yesterday, August 23, 2021, the International Monetary Fund (IMF) distributed the newly issued, and largest ever, general allocation of Special Drawing Rights (SDRs) worth $650 billion to countries. These SDRs that landed in countries’ accounts are not loans so they do not need to be repaid, and their usage is solely decided by the receiving country without any economic conditionality.
Receiving countries have a historic and unique opportunity to use this significant debt-free financing to ramp up their pandemic response and pave the way for a fair and just recovery that reduces inequalities. This is something that stakeholders from different countries, sectors, and industries have been pushing for over a year. Given the varied ways that these SDRs could be used; the likely politicized nature of the discussions between central banks and finance ministries; and with many interests at stake, ensuring that SDRs benefit the majority of a country’s people hinges on ensuring decision-making on the use of these resources is done through inclusive and transparent national dialogues. Various actors at national and international levels can apply pressure to make sure that happens.
As a quick reminder, Special Drawing Rights (SDRs) are an international reserve asset issued by the IMF that governments can exchange for cash, based on a basket of five currencies (U.S. Dollar, the Euro, the Chinese Renminbi, the Japanese Yen, and the British Pound Sterling). As of August 2021, 1 SDR roughly equals US$1.42. Using a crude analogy, SDRs are pumped into the global economy, similar to how central banks print money and inject it in their national economies.
So, what is the way forward with the SDRs allocated today?
What can countries do with their SDRs?
First, we need to reiterate: SDRs are not additional debt, nor attached to any conditionality. Countries can exchange them for hard currencies, and if they do so they will incur an SDR rate as little as 0.05% at today’s interest rate. This boost has come at a crucial time: COVID-19 is still very much alive and kicking, low-income countries have only vaccinated 1% of their populations, and most countries are bracing themselves for a new wave of austerity. Indeed, 85% of countries that have received emergency loans from the IMF have discussed austerity measures in the short and medium term, some even starting from this year!
SDRs are by no means a silver bullet that can solve all problems, but the decision on how to use SDRs can be critical: they could remain in central bank reserves and help maintain the austerity status quo; or they could be used to reduce inequalities and as a tool to set the path for alternative policy choices, steering away from austerity. For instance, Tunisia received $740 million worth of SDRs, which represents 55% of the Ministry of Health budget for 2021. Uganda will receive $490 million worth of SDRs which even exceeds the central government’s health spending in the newly approved budget of the year 2021/2022.
SDRs could be exchanged for hard currency in order to:
- Pay for imports (improving the balance of payments);
- Pay off debts (note: if they were to pay off debt to many of the IFIs, they could do so in SDR currency without needing to exchange to hard currency. However, it would also be a huge shame for countries to have to use this windfall for debt servicing to external private, multilateral or bilateral creditors; hence it is crucial that we see more movement on the cancellation and restructuring of debt);
- Use them for domestic public investments (such as social protection, healthcare, including vaccine distribution, education and others) or for any kind of public spending.
Ideally, countries would use the added SDR boost for public investments to transformatively respond to the crisis and improve the living conditions of their populations and reduce inequalities. However, in many countries it is not a straight forward process for reserves to be directly transferred to governments’ budgets for spending. Therefore, this might require new legislation or legal amendments to make that possible. Alternatively, the central bank could expand its credit to the government via central bank purchases of newly issued debt.
Central banks and governments in countries might also decide to keep their SDRs as a reserve asset to bolster their reserves instead of investing them in critical social spending and public goods, which may also give them the opportunity to borrow more. There are resources quickly emerging on the use of SDRs such as this Latindadd brief as well as this IMF guidance note. Whatever the decision, there will be major implications and that is why pressuring authorities for transparency and informing citizens of this new set of resources is so important.
It is crucial to note that since SDRs are allocated according to each IMF member countries’ quota in the IMF, determined largely by the size of its economy, those who need it least, i.e. rich countries, will get the most ($400 billion); while those who need it most, middle- and low-income countries, will get the least ($230 billion and $21 billion respectively). This uneven distribution logically and morally means rich countries ought to channel their share of SDRs they don’t need to middle- and low-income countries without adding to receiving countries’ debt burden or imposing economic conditionality. See this previous blog regarding effective SDR channeling here.
What can we do as civil society?
Civil society in countries can:
- Spread the word on SDRs. Indeed, not many people, let alone the general public, outside of the international finance sphere know what SDRs are and what this new issuance means. Therefore, informing and mobilizing the public is key to pressure governments on how SDRs should be used.
- Campaign and pressure their governments to make the best use of SDRs in public investments (such as in social protection, health, education and others) to support the response to the pandemic and reduce inequalities for a more equal and sustainable recovery.
- Call for eliminating any artificial legal hurdles that prevent central banks from transferring sold SDRs for budget support.
- Pressure governments for transparency on the use of this new SDR allocation, as well as call on the government to hold a national dialogue on how to best use this additional debt-free financing to avoid austerity in the recovery period.
- Monitor and engage with IMF discussions happening in your country that could have implications for fiscal decisions involving SDRs.
- In rich countries, campaign for significant portions of SDRs to be channeled to low- and middle-income countries in a way that is debt-free and conditionality free and additional to existing aid commitments.
- Campaign for the cancellation of debts such that countries are not tempted to use these badly-needed resources to repay external creditors.
These are just some ideas of what civil society at national and international levels can be doing at this time to be engaged and help ensure maximum benefit of this SDR issuance.
Interested to know how much your country will receive out of the $650 billion SDR allocation? See the table below!
IMF member country portion* of the $650bn allocation (in billions)
Afghanistan, Islamic Rep. of $ 0.44
Albania $ 0.19
Algeria $ 2.68
Angola $ 1.01
Antigua and Barbuda $ 0.03
Argentina $ 4.35
Armenia, Rep. of $ 0.18
Australia $ 8.98
Austria $ 5.37
Azerbaijan, Rep. of $ 0.54
Bahamas, The $ 0.25
Bahrain, Kingdom of $ 0.54
Bangladesh $ 1.46
Barbados $ 0.13
Belarus, Rep. of $ 0.93
Belgium $ 8.76
Belize $ 0.04
Benin $ 0.17
Bhutan $ 0.03
Bolivia $ 0.33
Bosnia and Herzegovina $ 0.36
Botswana $ 0.27
Brazil $ 15.09
Brunei Darussalam $ 0.41
Bulgaria $ 1.22
Burkina Faso $ 0.16
Burundi $ 0.21
Cabo Verde $ 0.03
Cambodia $ 0.24
Cameroon $ 0.38
Canada $ 15.06
Central African Rep. $ 0.15
Chad $ 0.19
Chile $ 2.38
China, P.R.: Mainland $ 41.65
Colombia $ 2.79
Comoros, Union of the $ 0.02
Congo, Dem. Rep. of the $ 1.46
Congo, Rep. of $ 0.22
Costa Rica $ 0.50
Côte d’Ivoire $ 0.89
Croatia, Rep. of $ 0.98
Cyprus $ 0.42
Czech Rep. $ 2.98
Denmark $ 4.70
Djibouti $ 0.04
Dominica $ 0.02
Dominican Rep. $ 0.65
Ecuador $ 0.95
Egypt, Arab Rep. of $ 2.78
El Salvador $ 0.39
Equatorial Guinea, Rep. of $ 0.22
Eritrea, The State of $ 0.02
Estonia, Rep. of $ 0.33
Eswatini, Kingdom of $ 0.11
Ethiopia, The Federal Dem. Rep. of $ 0.41
Fiji, Rep. of $ 0.13
Finland $ 3.29
France $ 27.54
Gabon $ 0.30
Gambia, The $ 0.08
Georgia $ 0.29
Germany $ 36.39
Ghana $ 1.01
Greece $ 3.32
Grenada $ 0.02
Guatemala $ 0.59
Guinea $ 0.29
Guinea-Bissau $ 0.04
Guyana $ 0.25
Haiti $ 0.22
Honduras $ 0.34
Hungary $ 2.65
Iceland $ 0.44
India $ 17.92
Indonesia $ 6.35
Iran, Islamic Rep. of $ 4.87
Iraq $ 2.27
Ireland $ 4.71
Israel $ 2.62
Italy $ 20.59
Jamaica $ 0.52
Japan $ 42.11
Jordan $ 0.47
Kazakhstan, Rep. of $ 1.58
Kenya $ 0.74
Kiribati $ 0.02
Korea, Rep. of $ 11.73
Kosovo, Rep. of $ 0.11
Kuwait $ 2.64
Kyrgyz Rep. $ 0.24
Lao People’s Dem. Rep. $ 0.14
Latvia $ 0.45
Lebanon $ 0.87
Lesotho, Kingdom of $ 0.10
Liberia $ 0.35
Libya $ 2.15
Lithuania $ 0.60
Luxembourg $ 1.81
Madagascar, Rep. of $ 0.33
Malawi $ 0.19
Malaysia $ 4.96
Maldives $ 0.03
Mali $ 0.25
Malta $ 0.23
Marshall Islands, Rep. of the $ 0.005
Mauritania, Islamic Rep. of $ 0.18
Mauritius $ 0.19
Mexico $ 12.18
Micronesia, Federated States of $ 0.01
Moldova, Rep. of $ 0.24
Mongolia $ 0.10
Montenegro $ 0.08
Morocco $ 1.22
Mozambique, Rep. of $ 0.31
Myanmar $ 0.71
Namibia $ 0.26
Nauru, Rep. of $ 0.004
Nepal $ 0.21
Netherlands, The $ 11.94
New Zealand $ 1.71
Nicaragua $ 0.36
Niger $ 0.18
Nigeria $ 3.35
North Macedonia, Republic of $ 0.19
Norway $ 5.13
Oman $ 0.74
Pakistan $ 2.78
Palau, Rep. of $ 0.004
Panama $ 0.51
Papua New Guinea $ 0.36
Paraguay $ 0.28
Peru $ 1.82
Philippines $ 2.79
Poland, Rep. of $ 5.60
Portugal $ 2.81
Qatar $ 1.00
Romania $ 2.47
Russian Federation $ 17.63
Rwanda $ 0.22
Samoa $ 0.02
San Marino, Rep. of $ 0.07
São Tomé and Príncipe, Dem. Rep. of $ 0.02
Saudi Arabia $ 13.65
Senegal $ 0.44
Serbia, Rep. of $ 0.89
Seychelles $ 0.03
Sierra Leone $ 0.28
Singapore $ 5.32
Slovak Rep. $ 1.37
Slovenia, Rep. of $ 0.80
Solomon Islands $ 0.03
Somalia $ 0.22
South Africa $ 4.17
South Sudan, Rep. of $ 0.34
Spain $ 13.03
Sri Lanka $ 0.79
St. Kitts and Nevis $ 0.02
St. Lucia $ 0.03
St. Vincent and the Grenadines $ 0.02
Sudan $ 0.23
Suriname $ 0.18
Sweden $ 6.05
Switzerland $ 7.89
Syrian Arab Rep. $ 0.40
Tajikistan, Rep. of $ 0.24
Tanzania, United Rep. of $ 0.54
Thailand $ 4.39
Timor-Leste, Dem. Rep. of $ 0.03
Togo $ 0.20
Tonga $ 0.02
Trinidad and Tobago $ 0.64
Tunisia $ 0.74
Turkey $ 6.37
Turkmenistan $ 0.33
Tuvalu $ 0.003
Uganda $ 0.49
Ukraine $ 2.75
United Arab Emirates $ 3.16
United Kingdom $ 27.54
United States $ 113.40
Uruguay $ 0.59
Uzbekistan, Rep. of $ 0.75
Vanuatu $ 0.03
Venezuela, Rep. Bolivariana de $ 5.09
Vietnam $ 1.58
Yemen, Rep. of $ 0.67
Zambia $ 1.34
Zimbabwe $ 0.97
TOTAL Low-Income Countries** (LICs) $ 20.65
TOTAL Emerging Economies (EE)s $ 229.86
TOTAL Advanced Economies (AEs) $ 399.49
TOTAL Sub-Saharan Africa (SSA) $ 23.61
TOTAL $ 650.00
*These are the amounts Oxfam has calculated each country would be entitled to according to member quotas in the IMF as of August 2021. In some instances, there could be barriers to such access for example the IMF released a statement on Afghanistan last week stating that the country cannot access the Special Drawing Rights (SDRs) or other IMF resources.
**LICs here defined as those eligible to receive financing from the IMF’s Poverty Reduction and Growth Trust (PRGT-eligible)