Rechanneling IMF Special Drawing Rights in a Responsible and Efficient Way

Reports and studies — Paris, Financial Advisory, Sovereign Advisory

February 09, 2022

The International Monetary Fund's creation of the equivalent of USD 650bn of Special Drawing Rights (SDRs) in August 2021 attracted considerable attention. SDRs provide unconditional liquidity that recipient countries can exchange against hard currencies (e.g., U.S. dollars, Euros, etc.)

The problem is that the allocation has disproportionately favored rich countries. For instance, G7 countries received almost nine times the amount of SDRs that Africa received.

The progress in rechanneling SDRs to countries that need them most has been largely insufficient in the post-COVID era and in the age of climate change, beyond recycling them through the IMF itself.

This Lazard Policy Brief argues that a pragmatic approach toward defining a ‘Reserve Asset’ would help magnify the effect of the allocation through Multilateral Development Banks (e.g., the African Development Bank, West African Development Bank, Inter-American Development Bank, etc.), which are best placed to allocate concessional money to green and sustainable projects.

Download the paper to read the findings in full.

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