The SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries.
The SDR is not a currency. It is a potential claim on the freely usable currencies of IMF members. As such, SDRs can provide a country with liquidity.
A basket of currencies defines the SDR: the US dollar, Euro, Chinese Yuan, Japanese Yen, and the British Pound.
Since the onset of the pandemic, SDR channeling (and equivalent currency amounts) has helped many countries in need, especially those eligible for financial support from the IMF’s Poverty Reduction and Growth Trust (PRGT) and the Resilience and Sustainability Trust (RST).
Since 2020, channeling of about $55 billion is providing the PRGT with the capacity to mobilize $40 billion in interest-free loans to our poorest members through 2024. This financing helps support growth enhancing reforms in these countries. So far, these loans have benefited 56 countries and could benefit more in the years ahead.
Channeling has also supported the operations of the RST, which delivers affordable long-term financing to help vulnerable countries tackle long-term challenges including climate change. To date, 23 RST partners have channeled about $47 billion to the RST, which is expected to contribute toward meeting an estimated $29 billion in affordable financing.
Despite a challenging environment, the authorities have broadly shown strong commitment to the reforms proposed in the program. Challenges to fuel and electricity supply have undermined economic growth, revenue mobilization, and government liquidity. Further, volatile spending weakened budget credibility. Public debt increased rapidly last year driven by regional issuances, and the authorities have ambitious borrowing plans for 2024. Thus, boosting revenue collection—particularly from fuel imports—and strengthening spending management will be key to preserving macroeconomic stability and debt sustainability.
GDP growth in 2023 was strong (7.3 percent), exceeding expectations for the third year in a row since the downturn in 2020. Unemployment is near pre-crisis levels while inflation has moderated. Government bond spreads increased in the second half of 2023 as markets became concerned that failure to meet the fiscal targets would lead to a loss of investment grade status. However, the overall fiscal deficit dropped from 4.0 percent of GDP in 2022 to 3.0 percent in 2023, and the Social and Fiscal Responsibility Law (SFRL) target was met. Following a Supreme Court ruling that the new contract with copper mine Minera was unconstitutional, the government ordered the closing of the mine. Banks are, on average, well capitalized and liquid, and stay broadly resilient in an adverse scenario.
Economic activity has picked up in recent months, supported by a rebound in agriculture, though still affected by the lingering effects of two years of drought and recent severe flooding. The security situation remains challenging, with the government scaling up its military actions against the Al-Shabab terrorist group, amid the planned withdrawal of the African Union Transition Mission in Somalia (ATMIS) by end-December 2024. Despite these significant challenges, the authorities remain committed to the reform effort, leveraging the benefits of the HIPC Completion Point achieved in December 2023.
Following years of high growth led by public investment, consecutive exogeneous shocks have weighed heavily on Djibouti’s economy and on its debt. Nonetheless, with the peace deal in Ethiopia, growth rebounded strongly in 2023. The normalization of the external environment together with Djibouti’s ongoing debt rescheduling discussions with main creditors are expected to reopen policy space, but restoring debt sustainability would require fully addressing the debt burden through a balanced mix of reforms, new concessional financing, and debt relief.
The 2024 Article IV Consultation with Belize highlights that real gross domestic product growth and inflation moderated in 2023. Belize’s key policy priorities include raising the primary balance with revenue mobilization and expenditure rationalization to lower public debt to a level that provides sufficient buffers, increasing expenditure in priority areas, adopting growth enhancing structural reforms, and building resilience to climate change and related disasters. These policies would boost growth and make it more inclusive. Boosting medium-term growth requires increasing female labor force participation, enhancing access to affordable credit for small and medium size enterprises, reducing crime, improving the business climate, and adopting a disaster resilience strategy that strengthens structural, financial, and post-disaster resilience and is based on a multi-year macro-fiscal framework. Keeping vulnerable financial institutions under enhanced supervision and requesting recapitalization when needed is important to maintain financial stability. Strengthening the currency peg requires increasing international reserves by reducing public debt, implementing structural reforms and limiting government financing by the Central Bank.
On May 10, 2024, the IMF’s Executive Board approved the use of Special Drawing Rights (SDRs) for the acquisition of hybrid capital instruments issued by prescribed holders. This new use of SDRs, which adds to seven already authorized prescribed SDR operations, is subject to a cumulative limit of SDR 15 billion to minimize liquidity risks. The Executive Board also established a strong expectation that contributors channeling SDRs to prescribed holders under such capital contributions have Voluntary Trading Arrangements (VTAs) in place to ensure sufficient liquidity and equitable distribution of potential SDR exchanges into currencies. A review of the proposed use is expected to be conducted when cumulative hybrid capital contributions surpass SDR 10 billion or two years after the authorization, whichever comes first.
Despite a challenging environment, the authorities have broadly shown strong commitment to the reforms proposed in the program. Challenges to fuel and electricity supply have undermined economic growth, revenue mobilization, and government liquidity. Further, volatile spending weakened budget credibility. Public debt increased rapidly last year driven by regional issuances, and the authorities have ambitious borrowing plans for 2024. Thus, boosting revenue collection—particularly from fuel imports—and strengthening spending management will be key to preserving macroeconomic stability and debt sustainability.
GDP growth in 2023 was strong (7.3 percent), exceeding expectations for the third year in a row since the downturn in 2020. Unemployment is near pre-crisis levels while inflation has moderated. Government bond spreads increased in the second half of 2023 as markets became concerned that failure to meet the fiscal targets would lead to a loss of investment grade status. However, the overall fiscal deficit dropped from 4.0 percent of GDP in 2022 to 3.0 percent in 2023, and the Social and Fiscal Responsibility Law (SFRL) target was met. Following a Supreme Court ruling that the new contract with copper mine Minera was unconstitutional, the government ordered the closing of the mine. Banks are, on average, well capitalized and liquid, and stay broadly resilient in an adverse scenario.
Economic activity has picked up in recent months, supported by a rebound in agriculture, though still affected by the lingering effects of two years of drought and recent severe flooding. The security situation remains challenging, with the government scaling up its military actions against the Al-Shabab terrorist group, amid the planned withdrawal of the African Union Transition Mission in Somalia (ATMIS) by end-December 2024. Despite these significant challenges, the authorities remain committed to the reform effort, leveraging the benefits of the HIPC Completion Point achieved in December 2023.
Following years of high growth led by public investment, consecutive exogeneous shocks have weighed heavily on Djibouti’s economy and on its debt. Nonetheless, with the peace deal in Ethiopia, growth rebounded strongly in 2023. The normalization of the external environment together with Djibouti’s ongoing debt rescheduling discussions with main creditors are expected to reopen policy space, but restoring debt sustainability would require fully addressing the debt burden through a balanced mix of reforms, new concessional financing, and debt relief.
The 2024 Article IV Consultation with Belize highlights that real gross domestic product growth and inflation moderated in 2023. Belize’s key policy priorities include raising the primary balance with revenue mobilization and expenditure rationalization to lower public debt to a level that provides sufficient buffers, increasing expenditure in priority areas, adopting growth enhancing structural reforms, and building resilience to climate change and related disasters. These policies would boost growth and make it more inclusive. Boosting medium-term growth requires increasing female labor force participation, enhancing access to affordable credit for small and medium size enterprises, reducing crime, improving the business climate, and adopting a disaster resilience strategy that strengthens structural, financial, and post-disaster resilience and is based on a multi-year macro-fiscal framework. Keeping vulnerable financial institutions under enhanced supervision and requesting recapitalization when needed is important to maintain financial stability. Strengthening the currency peg requires increasing international reserves by reducing public debt, implementing structural reforms and limiting government financing by the Central Bank.
On May 10, 2024, the IMF’s Executive Board approved the use of Special Drawing Rights (SDRs) for the acquisition of hybrid capital instruments issued by prescribed holders. This new use of SDRs, which adds to seven already authorized prescribed SDR operations, is subject to a cumulative limit of SDR 15 billion to minimize liquidity risks. The Executive Board also established a strong expectation that contributors channeling SDRs to prescribed holders under such capital contributions have Voluntary Trading Arrangements (VTAs) in place to ensure sufficient liquidity and equitable distribution of potential SDR exchanges into currencies. A review of the proposed use is expected to be conducted when cumulative hybrid capital contributions surpass SDR 10 billion or two years after the authorization, whichever comes first.
