Press Release Economic Crisis and Recovery IMF Sanctions

Special Drawing Rights — Newly Issued IMF Resources — Provided Important Support to Struggling Developing Countries Amid Pandemic and Economic Shocks, New Report Shows

April 20, 2022

Contact: Dan Beeton, 202-239-1460Mail_Outline

Washington, DC — Countries around the world have been using new reserve assets from the International Monetary Fund (IMF) since August, showing both that the resources were greatly needed and that more will be necessary, a new research report from the Center for Economic and Policy Research (CEPR) concludes. The report, “Special Drawing Rights: The Right Tool to Use to Respond to the Pandemic and Other Challenges,” by Kevin Cashman, Andrés Arauz, and Lara Merling, looks at how low- and middle-income countries have utilized their respective shares of $650 billion worth of Special Drawing Rights (SDRs) that the IMF allocated on August 23, 2021. The report release comes just days after the IMF downgraded its growth projections for the global economy, due in part to economic shocks from Russia’s invasion of Ukraine, as well as from the ongoing pandemic.

“The world is still in the midst of historic economic uncertainty and unequal recovery. This report shows the 2021 allocation of SDRs provided a safety net for many low- and middle-income countries and is, by far, the most substantial form of support. Additional allocations have the potential to provide climate financing and — in the short term — can assist these countries in staving off hunger and famine as they weather rising food prices due to the war in Ukraine, as well as effects from the pandemic, rising interest rates, and other factors,” report coauthor and economist Andrés Arauz said.

Examining data from August 23, 2021 until March 31, 2022, the authors found that during this period:

  • Ninety-eight low- and middle-income countries have used SDRs.
  • Forty-two countries have exchanged most of their SDR allocation for hard currency, amounting to $17.0 billion.
  • Fifty-five countries have used SDRs for IMF debt relief, totaling about $7.6 billion, including 23 countries that would not have had enough SDRs to repay the IMF without this allocation.    
  • At least 69 countries have included SDRs totaling $81.0 billion worth in their government budgets or used them for fiscal purposes.
  • Other initiatives, including the G20 Debt Service Suspension Initiative (DSSI) and the Catastrophe Containment and Relief Trust (CCRT) from the IMF, provided only a small fraction of the fiscal support derived from SDRs.

The allocation was also especially important to Africa and low-income countries. Almost all sub-Saharan African countries — 41 out of 45 — used their newly allocated SDRs in some way. Many countries utilized SDRs to directly address the effects of the pandemic, such as by purchasing vaccines, investing in economic recovery efforts, and supporting social programs. 

The report shows that governments unrecognized by the IMF, and countries with sanctioned central banks, have not been able to use SDRs. While the authors do not endorse sanctions regimes, they show that the SDR system is sanctions-compliant and that suggestions that new SDRs could be used by sanctioned countries are unfounded and are not valid justifications to block badly needed resources for developing countries.

“The 2021 allocation of Special Drawing Rights was by far the largest in the IMF’s history, and although the $650 billion worth was a much smaller number than legislation that passed the US House, it was still unprecedented in size,” Cashman said. “That so many countries have swiftly put their SDRs to good use shows how severe the economic downturn has been, and why more SDRs are needed. The Biden administration should throw its weight behind a new allocation exceeding last year’s, in order to save lives and shorten — and reduce the severity of — a new global recession.”


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