F20 Policy Briefing

Funding Climate Action and COVID-19 Recovery by New Special Drawing Rights – A Game Changer?

 

In August the International Monetary Fund (IMF) Board of Governors gave final confirmation for the issuance of new Special Drawing Rights (SDRs) worth $650 bn in order to tackle the COVID-19 and the climate crises. The newly created SDRs would be allocated to the IMF member states in proportion to each country’s share in the IMF’s capital. This leads to the situation that the bulk of the new SDRs -roughly $400bn – ended up in the balance sheet of the central banks (or their treasuries) of the Global North, whereas the countries from the Global South are in the greatest need for the new international reserve currency. To give the member states an opportunity to correct this miss allocation on a voluntary base the IMF plans the establishment of a new Resilience and Sustainability Trust (RST).

This policy briefing, lead-authored by Dr. Matthias Kroll (World Future Council, WFC) and co-authored by Stefan Schurig (Foundations Platform F20), analyses on which way a sum of around $300bn of the newly created SDRs could be rechannelled from the North to the South in form of grants (not loans). The RST could play a crucial role as transmitter between the countries from the Global North, which donate a part of their new received SDRs to the RST, and various Development Finance Institutions (DFIs) which will develop roadmaps together with the countries from the Global South to finance the vaccines and climate action measures.

Read the F20 #3/2021 Policy Briefing here.

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