Abstract

In 2021, after pressure from the US Congress and civil society, the US Department of Treasury proposed to the International Monetary Fund (IMF) that the organization issue to its member countries the largest allocation of Special Drawing Rights (SDRs) in its history. The US government holds a formal veto over this decision at the Fund, and can generally, if it chooses, determine whether an allocation will go forward. The US had previously opposed the allocation for more than a year — including in 2020, when the global economy suffered its worst contraction in gross domestic product (GDP) per capita in at least 75 years. Of the 2021 issuance, which was the equivalent of $650 billion, $209 billion went to emerging markets and developing economies (EMDEs), not including China, and provided crucial support when much of the developing world was still recovering from the impacts of the pandemic and facing shortages of vaccines. These SDRs provided balance of payments support, expanded space for countercyclical macroeconomic policy, and supported vital health and social spending — including vaccine purchases — that saved many lives. Using estimates of the relationship between recession and mortality in developing countries, this paper estimates that about 1.94 million people in EMDE countries died as a result of the severe recession in 2020 — not including deaths from the COVID virus. This analysis implies that at least 283,000 lives could have been saved if the SDR allocation had been issued in March 2020, when IMF Managing Director Kristalina Georgieva had called for it. Georgieva had called for a much larger issuance, based on the IMF’s estimate of developing countries’ financing needs at $2.5 trillion, and the US House of Representatives passed legislation that would have required the US to support an allocation worth $2.8 trillion. This could have saved several times more lives than those saved by the smaller issuance. This paper examines some of the benefits from an SDR issuance and also looks at a less-explored positive spillover: the effects that an SDR issuance can have on the US economy. The US exports about $1.1 trillion annually to EMDEs, supporting millions of export-related jobs within the United States. Slower rates of growth in the developing world have been associated with the loss of hundreds of thousands of export-related jobs in the US. The data and analysis indicate that many of these US jobs can be saved when EMDEs are able to avoid balance of payments or other economic crises and stabilize their economies. SDRs can contribute to this stabilization. Given the United States’ control over decision-making at the IMF and the process — including the legal and institutional framework — by which the US government’s and IMF’s approval is determined, the potential impact of SDRs on US employment could be important to the prospects of another issuance. 

*Mark Weisbrot, PhD, is co-director of the Center for Economic and Policy Research; Joe Sammut, PhD, is a senior research fellow at the Center for Economic and Policy Research; John Schmitt, Ph.D., is a distinguished fellow at Economic Policy Institute; Francisco Rodríguez, PhD is a senior research fellow at the Center for Economic and Policy Research and a faculty affiliate at the University of Denver. Eric Freeman, PhD, is a senior research fellow at the Center for Economic and Policy Research; Ivana Vasić-Lalović is a senior research associate at the Center for Economic and Policy Research.

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