ECA commends G7 Finance Ministers decision to back SDRs for developing countries

Addis Ababa, March 20, 2021 (FBC) -The meeting of the committee of experts of the Conference of African Ministers ended yesterday ahead of the African Finance Ministers Meeting next week.

The meeting saw experts pledge to do more to accelerate the implementation of the AfCFTA, improve domestic resource mobilization, deepen digitalization and accelerate implementation of the global Agenda 2030 and Africa’s Agenda 2063.

The Executive Secretary of the Economic Commission for Africa (ECA), Vera Songwe, welcomed the move by the G7 Finance Ministers to support issuance of new Special Drawing Rights which will help developing countries better respond to the COVID 19 crisis.

The Ministers agreed to support a new Special Drawing Rights (SDR) allocation to assist vulnerable countries respond adequately to the health and economic crisis triggered by the pandemic.

As part of the SDR discussions, it was agreed that the G7 would work with the IMF to make progress on enhancing transparency and accountability around the usage of SDRs and explore how countries could voluntarily recycle their SDR holdings to further support low-income countries.

The G7 agreed that the IMF should separately work up some options for how this might be done, without delaying agreement to a new general allocation, according to a statement issues by the UK Chancellor of the Exchequer.

Created by the IMF in 1969, SDRs play an influential role in global finance and help governments protect their financial reserves against global currency fluctuations.

It is also used as the basis of loans from the IMF’s crucial crisis-lending facilities with the institution using it to calculate its loans to needy countries, and to set the interest rates on the loans.

In 2009, $240 billion in SDRs were approved to IMF member countries in response to the global financial crisis to inject liquidity into the market.