The African Development Bank (AfDB) has called for the rechannelling of the Special Drawing Rights (SDR) approved by the Board of the International Monetary Fund to the Multilateral Development Banks.
The SDR is an international reserve asset created by the Internal Monitory Fund (IMF) in 1969 to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five currencies: The U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
The AfDB Vice President for Finance and Chief Finance Officer, Hassatou Diop N’Sele, reiterated the commitment made in 2022 by African leaders including the Presidents of Ghana, and Senegal and the UN Secretary-General for the rechannelling SDRs through the African Development Bank.
She added that the world’s poorest and most fragile countries have now utilized most if not all the SDRs that were allocated to them in 2021, raising further the need for fresh resources to help them respond to current and evolving economic and global challenges.
The Multilateral Development Banks, she underscored, presented the best value proposition and most efficient vehicle for the IMF’s SDR reallocation to developing countries thanks to their unique business model as they could multiply by three to four times the SDR allocated to them.
‘’MDBs are also able to support the private sector directly. The MDB “multiplier effect” means that USD 10 billion SDRs can be transformed into USD 30 to 40 billion of new MDB lending towards development projects across the world, helping address key global challenges such as tackling climate change and promoting food security among others’’ she assured.
Hassatou Diop N’sele opined that institutions such as the AfDB had triple A-ratings and strong standing and track records in the capital markets that allowed them to absorb risk on their balance sheet and offer borrowing members affordable financial terms better than market rates.
Prof. Yemi Osinbajo, the immediate past Vice President of Nigeria also disclosed that the AfDB could use its strong credit rating to help Africa and questioned why the IMF was the lender of the last resort while the AfDB could be empowered to support the African economy.
The Minister of State at the Ministry of Finance, Dr Mohammed Amin Adam also called for collaborative financing which would be a model that would bring together advanced countries, developing countries, international financing agencies, and the Multilateral Development Banks to address the challenges of developing countries without compromising on the objectives of the advanced countries.
In 2021, a historic and unprecedented USD 650 billion allocation of the new Special Drawing Rights was approved by the Board of Governors of the IMF, and over 57 per cent was allocated to the advanced economies which had less need for them and Africa received about 5 per cent of the total allocation, the smallest portion among the different regions of the world.
Joyce Adwoa Animia Ocran, ISD
