•Press Release Coronavirus International Monetary Fund US Foreign Policy World
Washington, DC — The International Monetary Fund’s allocation of $650 billion in Special Drawing Rights (SDRs) today is welcome, but much more will be needed to respond to the global challenges resulting from the COVID pandemic, which is spreading more rapidly due to the delta variant, Center for Economic and Policy Research (CEPR) Co-Director Mark Weisbrot said today.
“The global pandemic is already much worse than when the decision was made to distribute $650 billion worth of SDRs,” Weisbrot said. “Vaccinations are still unavailable to most people in developing countries, due in large part to high-income countries allied with Washington intervening on behalf of intellectual property protections for the big drug companies, including blocking other countries from making more vaccines. The world will be facing ongoing or intermittent lockdowns, struggling businesses, people unable to work, overwhelmed health care systems, and incredible uncertainty. This allocation of SDRs is a major breakthrough, but it won’t be enough.”
If developing countries are not able to access additional resources, we can expect many more people to die unnecessarily — not just from COVID, but also from the economic difficulties that these countries will experience. Weisbrot pointed out that economic research has shown a direct link between economic decline resulting from the pandemic and increased mortality.
According to the Bank for International Settlements, “Historical data show that recessions are systematically associated with higher mortality, especially in developing economies. Following a recession, death rates remain elevated for several years.” Researchers at the BIS noted: “Countries with a stronger predicted GDP decline in 2020 [also saw] a larger number of deaths in excess of official Covid-19 fatalities.”
“The international community can do much more to save lives by helping developing countries avoid economic crises and recover from negative shocks related to the pandemic,” Weisbrot said. “SDRs are the quickest and most efficient means of assisting them in doing that, and at no cost to the United States.”
The US House of Representatives recently passed legislation supporting an additional issuance of 1.54 trillion SDRs (worth 2.2 trillion dollars), and similar legislation is pending in the US Senate. Major humanitarian, labor, human rights, and faith-based groups including the AFL-CIO, Oxfam International, Amnesty International, Church World Service, the Teamsters, and the US Conference of Bishops have called on the IMF to allocate a total of $3 trillion worth of SDRs.
A new publication by CEPR Senior Research Fellow and economist Andrés Arauz, published by the Red Latinoamericana por Justicia Económica y Social (LATINDADD), explains how developing countries can best put SDRs to use.
SDRs are assets that are used to supplement the international reserves of countries, thereby helping to stabilize their finances and avoid balance of payments crises, as well as other financial crises that can cause severe economic damage, increases in extreme poverty, and loss of life. They can also be exchanged for hard currency by countries in need and spent to import essential goods, including vaccines and medical equipment. The Congressional Budget Office has confirmed that SDR allocations are completely cost-free for the US government.