Just to respond to the COVID-19 pandemic, Africa is facing financing needs of US$285 billion through 2025. For African nations to catch up to advanced economies, roughly US$520 billion more is needed through 2025. The historic allocation of US$650 billion in Special Drawing Rights (SDRs) offers one critical and sizable new source of financing. SDRs provide a much needed injection of liquidity, without adding to debt burdens.
However, SDRs are allocated according to a country’s IMF quota. That means advanced economies — which have the least need — received the lion’s share of the US$650 billion. Africa received only 5% of the total, roughly US$33 billion in SDRs. High-income countries could recycle their SDRs to nations that need them more. This recycling of SDRs is a crucial step to address global inequality and the growing financing gaps between countries.
African governments are now disclosing their plans for these new resources, from boosting their foreign exchange reserves to enhancing health and social protection systems, to paying off debt.
What are SDRs?
Special Drawing Rights are a type of reserve asset issued by the International Monetary Fund to all countries to help supplement countries’ official reserves. SDRs are not cash, but they can be traded for hard currency such as dollars, pounds, or euros.
How can they be used?
SDRs are a useful tool to plug fiscal gaps, meet external debt obligations, or address foreign exchange shortages. For example, if Liberia is facing a foreign currency shortage, it can voluntarily sell a portion of its SDRs to France in exchange for euros to pay for imported goods, such as medical supplies.
Tracking the use of Special Drawing Rights
ONE is tracking how African countries are intending to use their newly allocated SDRs. The map shows African countries coloured by their current SDR holdings, shown as a percentage of their total SDR allocations. Information on countries’ cumulative and current holdings is available by hovering/tapping on each country.
Countries may use SDRs in different ways. Some may convert them to other currencies and hold on to the foreign reserves. Others may use SDRs to service debt. SDRs can also be converted to other currencies and spent.
What ONE is calling for
- Advanced economies should commit to a rapid channeling of an initial 25% of their SDRs to reach US$100 billion. Beyond this, advanced economies should pledge to recycle more SDRs once new mechanisms are in place. This should be based on the scale of need in low- and middle-income countries.
- For their part, African governments should commit to open and transparent processes that will allow citizens and civil society organizations, as well as the legislature, to clearly follow how SDRs are used. This includes publicly disclosing plans, periodically publishing progress reports, and conducting an assessment of how the implemented activities and results align with objectives.
Are advanced economies channeling their SDRs?
We are actively tracking developed economies’ commitments to channel SDRs. This table is updated regularly, using publicly available information, press statements, and other official sources.
How can I learn more and stay informed?
ONE’s Africa COVID-19 Tracker provides the latest reliable figures, commentary, and analysis on the health, economic, and social impacts of the pandemic on the continent. Sign up for our weekly email Aftershocks and follow @ONEAftershocks