IMF Managing Director Kristalina Georgieva’s Statement at the Paris Peace Forum on Increasing Support for Vulnerable Countries via SDR Rechanneling
IMF News, November 11, 2021
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- Published: November 11, 2021
Overview
- The world economy is recovering and is expected to achieve 5.9% growth this year.
- For low-income developing countries, growth is projected to be 3%.
- The statement highlights a dangerous divergence driven by severe inequality in access to vaccines and in available policy space for vulnerable countries.
- The recent Special Drawing Rights (SDRs) allocation is presented as an important tool to address liquidity and reserve needs in financially constrained nations.
Key statistics and findings
- New SDR allocation: $650 billion.
- Allocation breakdown:
- $275 billion went to emerging markets and developing economies.
- $21 billion went to the poorest countries.
- Africa received about $31 billion.
- Growth projections:
- Global: 5.9% growth this year.
- Low-income developing countries: 3% growth this year.
Policy proposals and instruments
- Rechanneling of SDRs:
- Voluntary on-lending or rechanneling from countries with strong external positions to more vulnerable countries is advocated.
- The G20 global ambition: rechannel $100 billion of the SDR allocation from richer to poorer countries.
- Existing and proposed IMF instruments:
- PRGT (Poverty Reduction and Growth Trust): an instrument to which SDRs can be rechanneled to boost zero-interest lending to low-income countries.
- RST (Resilience and Sustainability Trust): a proposed, longer-term instrument with low interest rates to provide funding to low-income countries, vulnerable middle-income countries, and fragile island economies.
- Aspiration for the RST: start with about $30 billion, building it up to $50 billion and beyond.
- Technical assistance:
- The IMF offers to provide technical advice to multilateral development banks exploring other viable options for rechanneling.
Implementation timeline and targets
- RST design and implementation goals:
- Aim to have RST design in place by Spring Meetings 2022.
- Aim for implementation by the IMF Annual Meetings in the same year.
Rationale and framing
- SDRs improve a country’s reserve position and create liquidity without adding to debt.
- Due to IMF shareholding and quota arrangements, countries most in need received a relatively small part of the overall allocation, motivating rechanneling.
- Moral and self-interest argument:
- It is morally right to help everyone in need.
- It is also in everybody’s self-interest—“No-one is safe until everyone is safe.”
- This applies to fighting the pandemic and to fighting climate change.
- RST purpose:
- Support policies for a transformation to a low-carbon and climate-resilient economy.
Summary conclusions
- The new SDR allocation, combined with further rechanneling from countries with strong reserve positions to more vulnerable countries, is presented as an example of enlightened self-interest.
- Collective action and cooperation are emphasized as necessary to win the global crisis.
Source: IMF Managing Director Kristalina Georgieva’s Statement at the Paris Peace Forum, November 11, 2021.