CSOs Make Call for the Issuance of Special Drawing Rights (SDRs) by IMF to Support Africa’s Economic Recovery
Civil Society Organizations (CSOs) including SEATINI Uganda, Uganda Debt Network (UDN), Civil Society Budget Advocacy Group (CSBAG), Transparency International Uganda (TIU) and the African Forum and Network on Debt and Development (AFRODAD) have called on the International Monetary Fund (IMF) to release Special Drawing Rights (SDRs) as a measure to address current liquidity challenges faced by African countries and other developing countries broadly.
CSOs made this call on Thursday, 25th March 2021 during a media briefing that brought together representatives from national, regional and global media outlets, Civil Society and Government Ministries, Departments and Agencies.
SEATINI, UDN, TIU, CSBAG and AFRODAD have been advocating for the Issuance of Special Drawing Rights (SDRs) as a key financing option to fight the COVID Pandemic and boost African economic recovery.
The SDR is an “international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. So far SDR 204.2 billion (equivalent to about US$281 billion) have been allocated to members, including SDR 182.6 billion allocated in 2009 in the wake of the global financial crisis.
While giving his opening remarks, Jason Braganza, the Executive Director at AFRODAD noted that in the last decade, there have been warnings that African Continent is approaching a debt crisis because of the neoliberal development agenda with the rise in privatization of finance. Governments have now embraced non-concessional financing options such as commercial and the BRICS lenders. Jason also noted that commercial creditors have remained largely unwilling to participate in current debt relief initiatives as they demand a return on their investment. African Governments should now be cautious of what return on investment they are accepting while contracting such loans.
Jason Braganza also reiterated that there is need for an equitable allocation mechanism of SDRs to ensure that countries that need this money the most receive it because there are cases where countries in the global North may not necessarily need this reserve currency due to their quantitative easing programs embarked upon.
In a similar manner, Jane Nalunga, the Executive Director at SEATINI Uganda noted that with the advent of the COVID 19 pandemic, Low Income Countries have been pushed to borrow heavily to address their fiscal needs and this has left them with larger piles of unsustainable public debts.
‘‘The COVID 19 crisis has left many African economies in financial distress to effectively tackle economic recovery which necessitates the need for the IMF to issue new SDRs as an immediate option towards addressing the challenges at hand,’’ said Nalunga.
Tirivangani Mutazu, from AFRODAD noted that a new issuance of SDRs by IMF would build up the level of foreign currency reserves in the central banks so making it possible for developing countries to address any Balance of Payment Imbalances and also provide fiscal space for public spending in Covid 19 response including vaccines and strengthening the healthcare system.
He also mentioned that external public debt service of developing countries is projected to reach US$ 345 billion in 2021 which is twice as much as the projected SDR allocation to these countries upon a new issuance These countries therefore risk spending such additional resources on debt servicing. Tirivangani therefore called for a larger issuance of new SDRs to a tune of $3 trillion.
According to Julius Kapwepwe, the Director Programs at UDN, reiterated the need to cancel all debts that Uganda has acquired overtime.
Sophie Nampewo, a Senior Budget Policy Specialist at CSBAG called on the government to account for all the borrowed monies.
Samson Muwanguzi, Acting Commissioner, Debt Policy Issuance at the Ministry of Finance, Planning and Economic Development emphasized that widening the tax base will greatly help in reducing the ever growing debt burden for Uganda.
During the media briefing, CSOs also reaffirmed their commitment towards advocating for structural, systematic and systemic transformation and reorganization of the global financial, debt and economic architectures.