ONE Campaign Applauds Canada’s $1.3 billion contribution of Special Drawing Rights to accelerate climate finance and poverty reduction
September 20, 2023 – OTTAWA The ONE Campaign is applauding Canada’s announcement at the Climate Ambition Summit in New York today allocating $700 million in Special Drawing Rights (SDRs) (valued at $1.3 billion CAD) to the Poverty Reduction and Growth Trust (PRGT) of the International Monetary Fund (IMF), accelerating climate adaptation and poverty reduction in low-income countries. This announcement brings Canada’s sharing of its new SDR allocation to the Global South to 26%, and brings its total shared SDRs to 48% – more than any other shareholder to the IMF.
“We are excited to see Canada leading the charge in global climate and development finance with today’s announcement by Prime Minister Justin Trudeau. This is a significant increase in financial support that will be immensely valuable to countries across the African continent and beyond facing climate disasters and big setbacks in poverty reduction, while costing essentially nothing to Canadians,” said Elise Legault, ONE Canada Director. “The potential for action by low and middle income countries, especially on the African Continent, is absolutely massive – and we cannot solve the climate crisis without their innovation, action and leadership. Today’s announcement is a big step forward in ensuring that we have global solutions to this global challenge, and that those countries that are most vulnerable and most impacted by climate have a real voice in building that future.”
SDRs are a type of reserve asset issued by the IMF to help supplement countries’ official reserves. They provide a much needed injection of financial liquidity without adding to debt burdens, and which can be done at very low cost for donor countries like Canada because they are long-term loans of international reserves. While they are not cash, they can be traded for hard currency, and they are a useful tool to plug fiscal gaps, meet external debt obligations, address foreign exchange shortages, or invest in pandemic preparedness and climate adaptation and mitigation. SDRs are one of the most simple and significant approaches to increasing climate finance in global markets today.
The PRGT currently provides zero interest rate loans to low-income countries. Demand for PRGT financing is projected to be strong both in the short- and long-term. During the 2023 World Bank/IMF Spring Meetings, Managing Director Kristalina Georgieva noted that IMF staff anticipate a robust PRGT request pipeline for 2023, almost double what was estimated in 2022.
“The ONE Campaign has been encouraging Canada to share its SDRs since they were first activated as part of the IMF’s COVID response mechanism,” continued Legault. “This move is a strong show of leadership and urgent action within the G7 economies for serious and immediate action on climate finance, poverty reduction, and preparing for future pandemics – unlocking money that countries can use according to their own priorities.”
For more information and technical analysis on Special Drawing Rights, please see the ONE Campaign’s Data Dive here.
ONE Canada Media Contact